In 2017, Skylar sold an apartment building for $20,000 cash and a $300,000 note
ID: 2431064 • Letter: I
Question
In 2017, Skylar sold an apartment building for $20,000 cash and a $300,000 note due in two years. Skylar’s cost of the property was $250,000, and he had deducted depreciation of $150,000, $60,000 of which was in excess of what the straight-line amount would have been.
Do not round intermediate computations. Round your final answers to the nearest dollar.
Under the installment sales method, Skylar's total realized gain is $___. In 2017, he recognizes § 1250 gain of $______ and § 1231 gain of $______.
Explanation / Answer
a) Sales price = 300,000 + 20,000 = 3,20,000 $
Adjusted basis = Cost – accumulated depreciation = 250,000 – 150,000 = 100,000 $
Realized gain = Sales price – adjusted basis = 320,000 – 100,000 = 220,000 $
b) From 220,000 realized gain, 60,000$ realized gain under § 1250
From remaining gains 220000 – 60000 = 160000 $
c) Under § 1231 = (Remaining gain/Sales price) *cash collected
= (160000/320000) *20000
= 10000 $