Question

Carlos bought a building (AB) for $113,000 in 2014. He added an leasehold improvements addition to the building for $26,000. In 2018, he sold (SP) it for $212,000. What was his long-term capital gain (LTCG) (ignore depreciation

Answer 1

Answer:

Long-term capital gain = $73,000

Explanation:

The long-term capital gain (LTCG) can be calculated using the following formula:

Long-term capital gain = Selling price - Cost of acquisition - Cost of improvement .............. (1)

Where;

Selling price = $212,000

Cost of acquisition = $113,000

Cost of improvement = $26,000

Substituting the values into equation (1), we have:

Long-term capital gain = $212,000 - $113,000 - $26,000 = $73,000

Note:

Since no information on cost inflation index is given in the question, that implies that there is no need to use indexed cost of acquisition and indexed cost of  improvement in our calculation. Therefore, the Cost of acquisition and Cost of improvement has to be used as given in the question.