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my company bought a home for $165,000.00, we spent $120,000.00

Customer Question
to convert it to an...
my company bought a home for $165,000.00, we spent $120,000.00 to convert it to an office. If we sold it for $600,000.00 after 10 ten years what would we have to pay in capital gains?
Submitted: 8 years ago.Category: Tax
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Answered in 8 minutes by:
11/1/2009
Tax Professional: Merlo, Accountant replied 8 years ago
Merlo
Merlo, Accountant
Category: Tax
Satisfied Customers: 9,783
Experience: 25+ years tax consulting. Specializing in returns for US citizens living abroad
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Hello grandhope,

Do you know how much depreciation you have claimed total during the 10 years you have owned it and used it as an office building?



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Customer reply replied 8 years ago
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Tax Professional: Merlo, Accountant replied 8 years ago
Hello again grandhope,

You would need the depreciation numbers in order to determine your taxable gain.

The formula to figure your taxable gain is:

Selling price of $600,000
Less Your basis (original cost plus cost of improvements) = $285,000
PLUS the depreciation you claimed for the last 10 years.

Commecial property is depreciated over a period of 39 years. If your basis was $285,000, then your depreciation each year should have been roughly $7,300. So for 10 years you would have claimed $73,000 in depreciation. I will use that figure for the purposes of calculating what your gain will likely be.

Selling price of $600,000 less basis of $285,000 = $315,000. Add back in your depreciation of $73,000 and you have a gain of $388,000.

On the gain of $388,000 -- The $73,000 which is attributed to the recapture of depreciation is taxed at a 25% ($18,250) and the remaining gain is taxed as a long term capital gain at a rate of 15% ($315,000 @15%) = $47,250.

Your total tax on the gain from the sale will be approximately $65,500.

If this was helpful please press the Accept button. Positive feedback is also appreciated.

Thank you grandhope


Merlo
Merlo, Accountant
Category: Tax
Satisfied Customers: 9,783
Experience: 25+ years tax consulting. Specializing in returns for US citizens living abroad
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