Calculate the capital gains tax in 2021, assuming a capital gains tax of 20%. PTI Inc., located in a country which has a capital gains tax, conducted the followingtransactions:a. Purchased a building in February 2018 for $26,000,000. In March 2019, the companyspent $2,800,000 to install solar panels for electricity in the building. The buildingwas sold for $40,000,000 in 2021. The annual maintenance cost was $500,000. Thecost of advertising the sale of the building and the legal fees amounted to $1,200,000.b.A motor vehicle was purchased for $5 million on January 1, 2018. The vehicle was soldin 2021 for $4.5 million.c. Bought an antique painting for $3.5 million in 2019. The painting was sold in 2021 for1 million.d.Purchased a government bond for $5,000,000.The company is entitled to Annual Exemption of $500,000. Capital losses as at 1 January2021 was $7,500,000.

Capital Gain Taxes It is important to calculate the capital gain taxes which are incurred in the…

Answered: PTI Inc., located in a country which…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Related questions

Concept explainers

Question

Calculate the capital gains tax in 2021, assuming a capital gains tax of 20%.

PTI Inc., located in a country which has a capital gains tax, conducted the following
transactions:
a. Purchased a building in February 2018 for $26,000,000. In March 2019, the company
spent $2,800,000 to install solar panels for electricity in the building. The building
was sold for $40,000,000 in 2021. The annual maintenance cost was $500,000. The
cost of advertising the sale of the building and the legal fees amounted to $1,200,000.
b.A motor vehicle was purchased for $5 million on January 1, 2018. The vehicle was sold
in 2021 for $4.5 million.
c. Bought an antique painting for $3.5 million in 2019. The painting was sold in 2021 for
1 million.
d.Purchased a government bond for $5,000,000.
The company is entitled to Annual Exemption of $500,000. Capital losses as at 1 January
2021 was $7,500,000.

Definition Definition Tax imposed by the government on the "gain" or increase in the value of an asset at the time of its sale by the owner. Capital gain is computed based on the purchase price and sale price of the asset. If the sale price of the asset is more than the purchase price, there is a gain on the sale of asset. A tax is imposed on such gain in accordance with the applicable tax rates at the time of sale.

Expert Solution

Step by step

Solved in 2 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.

Similar questions