Henry, a long-time client of yours, recently sold a few assets from his business
ID: 2557612 • Letter: H
Question
Henry, a long-time client of yours, recently sold a few assets from his business. He brings the following information to you hoping you can help him make heads or tails of it:
-He sold an office building that he owned and used in his business. He purchased it 15 years ago for $800,000. Since then, he has added major improvements to the building, totaling $15,789.
-The depreciation taken on the building and the improvements through the date of the sale is $400,000.
-He sold the building for $978,000.
how do I determine gain or loss on the sale and how it will be taxed or deducted.
Explanation / Answer
Purchase price = 800000
Add: major improvement cost= 15789
Total cost of purchase of building and improvement = 800000+15789
Less: Depreciation = 400000
Book value of the building = 800000+15789-400000=415789
Sale value of the building = 978000
gain on sale of building = 978000-415789 = 562211
Gain on sale of building is taxed generally but if this amount is invested agin within stipulated period then allowed as deduction.