Ibrahim purchased a house in 2019 and rented it out the entire time he owned it. His adjusted basis in the property before depreciation is $274,500($41,500 attributable to land). In 2021, Ibrahim sold the property for $320,000 with $7,500 in deductible expenses. The total depreciation claimable was $17,093.   What is Ibrahim's taxable gain on the disposition of the building?

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A: Answer:

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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.