On October 1st, you purchased a residentialhome in which to locate your professional office for$350,000. The appraisal is divided into $80,000 forthe land and $270,000 for the building.(a) In your first year of ownership, how much canyou deduct for depreciation for tax purposes?(b) Suppose that the property was sold at $375,000at the end of fourth year of ownership. What isthe book value of the property?

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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.