Tonya Jefferson, a sole proprietor, runs a successful lobbying business in Washi
ID: 2451277 • Letter: T
Question
Tonya Jefferson, a sole proprietor, runs a successful lobbying business in Washington, D.C. She doesn't sell many business assets, but she is planning on retiring and selling her historic townhouse, from which she runs her business in order to buy a place somewhere sunny and warm. Tonya's townhouse is worth $1,000,000 and the land is worth another $1,000,000. The original basis in the townhouse was $600,000, and she has claimed $250,000 of depreciation deductions against the asset over the years. The original basis in the land was $500,000. Tonya has located a buyer that would like to finalize the transaction in December of the current year. Tonya's marginal ordinary income tax rate is 35 percent.
Explanation / Answer
Solution:
Tonya's townhouse worth $1,000,000
Original basis Townhouse $600,000
Claimed of depreciation deductions $250,000
Remaining Value of House = $3,50,000
Land worth another $10,00,000
Original basis in the land was $500,000
Remaining Value of Land = $5,00,000
Finally Tonya Jefferson Amount 3,50,000 + 5,00,000
= 8,50,000
Income Tax 35% on Total Amount:
= 8,50,000 * 35 /100
= 2,97,500