Question

Carol sold her investment property for $450,000 and had $21,000 in closing costs. The property had a beginning basis of $312,000, capital improvements of $34,000, and depreciation of $80,000. What was Carol's capital gain?

Answer 1

Answer:

$163,000

Explanation:

New adjusted basis for Carol's property will be

the Beginning basis plus capital gain minus depreciation

=$312,000  + 34,000 - $ 80,000

=$346,000 -$80,000

=$266,000

The net amount realized from the sale is

Selling cost minus closing costs

= $450,000 -$21,000

=$429,000

The capital gain will be the amount received - new adjusted basis

=$429,000 - 266,000

=$163,000