Part 6) After four years, Willums accepts an offer of $2.7 million for Rosemary Cove. Because the property was not listed with a real estate agent, her sales costs are only $20,000. The outstanding mortgage balance is $1,005,769. Which of the following is closest to Willums’ equity reversion after taxes (ERAT)? A) $1,336,320. B) $1,396,350. C) $1,384,595. D) $1,117,575.
The correct answer was C) $1,384,595.
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| Calculation | Net Sale Price | 2,680,000 | = $2,700,000 sale price − $20,000 costs. | Less Mortgage Balance | (1,005,769) | Given | Pre-Tax Equity Reversion |
| Less Taxes Due | (289,636) | See below. | ERAT | 1,384,595 |
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| Calculation | Sale Price |
| 2,700,000 |
| Less Cost of Sale
|
| (20,000) |
| Net Sale Price |
| 2,680,000 |
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|
|
|
| Purchase Price | 1,500,000 |
|
| Less Accum Depr | (214,545) |
| =$53,636.36 × 4 | Less Adj Purchase Price | 1,285,455 | (1,285,455) |
| Realized Gain(Loss) |
| 1,394,545 |
| Less Accumulated Depr |
| (214,545) |
| LT Cap Gain |
| 1,180,000 |
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|
| Tax on Depr Recapture | 53,636 |
| = $214,545 (0.25) | Tax on LT Cap Gain | 236,000 |
| = $1,180,000 (0.20) | Total Tax Due | 289,636 |
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This question tested from Session 13, Reading 51, LOS c |
发表于 2008-5-26 16:04
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