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Lane
Lane, JD, CFP, MBA, CRPS
Category: Capital Gains and Losses
Satisfied Customers: 11362
Experience:  Have been providing Financial and Tax advice for 30 years.Concentration in Corporations, Estate, Income Tax and Business Planning
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We are selling a retail business which include reaeastate

Customer Question

We are selling a retail business which include reaeastate 1.5 M real estate plus 2.5M business(goodwil). When we bought it was 1.0M.We have taken all depreation of I M in our past tax return. I am one third partner. The business is located in Maryland. How much capital gain I have to pay.
Submitted: 1 year ago.
Category: Capital Gains and Losses
Expert:  Lane replied 1 year ago.

Hi,

...

OK, the Gain, as it sounds like you know, will have to be taxed in two pieces, recapture portion of gain and regular capital gains on the rest.

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(also I'm assuming here that you are using a pass-through entity, rather than a C-Corp)

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If sales price is 4mil (and all gains, no ordinary income, if what you're selling is allocated on the 894 as either goodwill or real property)..

... and you have depreciation recapture 1mil (depreciation recapture is at 25%) then you still have 2mil of regular capital cain.

...

so( 1,000,000,000 x .25) = 250k to cover the depreciation recapture (and of course 1/3 of that is yours)

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and the other should be looked at from YOUR tax bracket perspective because the rest of thgain will be taxed based on your household taxable income:

...

Long-term gains and qualified dividends taxed at

  • 0% if taxable income falls in the 10% or 15% marginal tax brackets
  • 15% if taxable income falls in the 25%, 28%, 33%, or 35% marginal tax brackets
  • 20% if taxable income falls in the 39.6% marginal tax bracket

...

so of the remaining 2mil, your portion is 666,666,666 of gain (and the rate on that will be graduated (through the brackets you see above based on TOTAL household income, because the gain is also a component OF your taxable income)

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Just to ball park. I'll assume that this is your ONLY income, married filing jointly, no dependents

...

ncome Tax CalculationsFederal

Gross Income$666,666.00

Deductions for AGI($0.00)

Adjusted Gross Income (AGI)$666,666.00

Deductions and Personal Exemptions

Standard Deduction
(Married)($12,400.00)

Personal Exemptions
(Two dependants)($7,900.00)

Taxable Income$646,366.00

Federal Income TaxShow Calculations$0.00

Additional Taxes

Net Investment Income Tax
(3.8% surtax on $396,366 of high-income capital gains, see note)($15,061.91)

Long-Term Capital Gains Tax
(On $666,666 in capital gains, see note)($133,333.20)

Gross Tax$133,333.20

Tax Credits & PaymentsN/A

Owed Tax $133,333.20

...

Than adding the depreciation recapture (133,333 + (250,000/3)) = 216,666.

...

Very ballpark but without more of your individual info a good place to start

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