George purchased a lot in 2010 for $2,000,000 (he paid $1,200,000 and borrowed $800,000 from a bank), in the same year he built a small office building on the lot at a cost of $500,000. In 2015 he made improvements for $50,000. George sold the building for $3,000,000 in 2023. George's approximate depreciation was $50,000.   a) What was his basis?     b) Amount of gain realized?     c) Amount of gain recognized?

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Capital Gain

Any capital asset when sold can give the seller a higher or lower price from its purchase price leading to a capital gain or capital loss. The time period of holding an asset is decided based on if it is a long term or short-term capital gain. On that basis, the rate of taxation is decided if it is 20%, 15% or according to the tax brackets. The rate of taxation differs in the case of equity or debt, whether long or short term. The capital gain can be adjusted from capital loss to arrive at a net capital gain. The amount of gains and the exemption has to be reported in the tax return filed in the financial year in which the asset was transferred. The tax return can be filed quarterly, monthly, semi-annually or annually.