Ken sold a rental property for $682,000. He received $186,000 in the current year and $124,000 each year for the next four years. Of the sales price, $502,500 was allocated to the building, and the remaining $179,500 was allocated to the land. Ken purchased the property several years ago for $576,500. When he initially purchased the property, he allocated $457,500 of the purchase price to the building
Ken sold a rental property for $682,000. He received $186,000 in the current year and $124,000 each year for the next four years. Of the sales price, $502,500 was allocated to the building, and the remaining $179,500 was allocated to the land. Ken purchased the property several years ago for $576,500. When he initially purchased the property, he allocated $457,500 of the purchase price to the building
Chapter16: Accounting Periods And Methods
Section: Chapter Questions
Problem 13DQ
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Ken sold a rental property for $682,000. He received $186,000 in the current year and $124,000 each year for the next four years. Of the sales price, $502,500 was allocated to the building, and the remaining $179,500 was allocated to the land. Ken purchased the property several years ago for $576,500. When he initially purchased the property, he allocated $457,500 of the purchase price to the building and $119,000 to the land. Ken has claimed $30,900 of
Ken had no other sales of §1231 or capital assets in the current year.
Required:
- For the year of the sale, determine Ken's recognized gain or loss.
- For the year of the sale, determine character of Ken's gain, and calculate Ken's tax due because of the sale (assuming his marginal ordinary tax rate is 32 percent).
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