Question

What would be the taxable gain (loss) on a property given the following information?

Sale price $5,500,000

repairs & Maintenance $5,000

Brokers Commission 6%

Depreciation $1,000,000

Utilities 3,500

Original purchase price $4,000,000

Cost of a new roof 350,000

Answer 1

Required:

Taxable gain (loss) = Sales price after brokers commission - Written down value of property

Taxable gain (loss) = ($5,500,000 - $3,30,000) - $3,350,000

Taxable gain (loss) = $5,170,000 - $3,350,000

Taxable gain (loss) = $1,820,000.

Working:

1) Brokers commission = $5,500,000 * 6% = $330,000

2) Written down value of property

Original purchse price	$4,000,000
(+) Cost of a new roof	$350,000
(-) Depreciation	($1,000,000)
Written down value of property	$3,350,000

3) Repairs & Maintenance, and utilities are revenue expenditure and therefore would not consider while calculating Written down value of property.