Kareem bought a rental house in March 2015 for $300,000, of which $50,000 is allocated to the land and $250,000 to the building. Early in 2017, he had a tennis court built in the backyard at a cost of $7,500. Kareem has deducted $30,900 for depreciation on the house and $1,300 for depreciation on the court. In January 2020, he sells the house and tennis court for $330,000 cash. a.  What is the adjusted basis of the rental house and land at the time of the sale? $fill in the blank  What is the adjusted basis of the tennis court at the time of the sale? $fill in the blank  What is Kareem's realized gain or loss? Kareem's realized   on the sale is $fill in the blank. b.  If an original mortgage of $80,000 is still outstanding and the buyer assumes the mortgage in addition to the cash payment, what is Kareem's realized gain or loss? Kareem's realized   is $fill in the blank .   c.  If the buyer takes the property subject to the $80,000 mortgage rather than assuming it, what is Kareem's realized gain or loss? Kareem's realized   is $fill in the blank

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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.