A friend of yours wants to become a client and start a new company Cyberdyne Systems, specializing in AI research. In order to get seed money, she wants to sell a rental property she has owned for about 25 years. Below is the information derived from her tax returns, which she inherited from her uncle, who owned the home for many years before dying. (NOTE: Building Land Breakout will be 80/20)
Cost of the Home 1955, when uncle purchased it: $20,000
FMV of the House (in 1995; 25 years ago) $200,000
Value at time placed into service as rental property (2003): $250,000
Depreciation taken on the house: $150,000
Sales price of the house: $525,000
Expenses of selling the home: $25,000
Additional Assets for the home and their required information (All assets were put into service after the rental property was established and all items will go to the new owner):
Asset
|
Purchase
Price
|
Accumulated
Dep
|
MACRS Life
|
Refrigerator
|
$3500
|
$2500
|
5 Years
|
Water Heater
|
$1500
|
$600
|
27.5 Years
|
Stove
|
$2500
|
$2500
|
5 years
|
New Bathroom/Bedroom
Improvement
|
$50,000
|
$7,500
|
27.5 Years
|
Using the above questions, answer the questions below:
What is the AR for the sale of the entire property? What is the AB for the entire property?
Provide an allocation Excel for the AR and AB for each property and calculate the entire gain on the sale of this property into the following categories: