KNB sold real property to Firm P for $15,000 cash and Firm P’s assumption of the $85,000 mortgage on the property. Required: What is KNB’s amount realized on the sale? b. Compute KNB’s after-tax cash flow from the sale if its adjusted basis in the real property is $40,000 and its marginal tax rate is 35 percent.
KNB sold real property to Firm P for $15,000 cash and Firm P’s assumption of the $85,000 mortgage on the property. Required: What is KNB’s amount realized on the sale? b. Compute KNB’s after-tax cash flow from the sale if its adjusted basis in the real property is $40,000 and its marginal tax rate is 35 percent.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
KNB sold real property to Firm P for $15,000 cash and Firm P’s assumption of the
$85,000 mortgage on the property.
Required:
What is KNB’s amount realized on the sale?
b. Compute KNB’s after-tax
property is $40,000 and its marginal tax rate is 35 percent.
Expert Solution
Step 1
Calculation of KNB’s amount realized on the sale:
KNB’s amount realized on the sale = Cash + Relief of debt
= $15,000 + $85,000
= $100,000
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