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Showing posts from July, 2015

Selling Business Property - Capital Gain? Ordinary Income? Help?

I had a question recently about the sale of a business property (house/office and land) and how it would be taxed after the sale.  In this case, the property owner had used it for his law practice for many years....you've seen the small houses near the "downtown" area of your local community; many are occupied by attorneys as their offices.

So, here are the facts.  He bought the property in 1984, used it to run his law practice, and now has sold it for about twice the purchase price.  For simplicity sake, he bought for $50,000, and sold in 2014 for $100,000.  Of course, the property is fully depreciated, so his basis in the property is $0. (Basis = sales price - depreciation) His question for me?  How much tax will I owe?

It would be nice if I could tell him that the gain is all Long Term Capital Gain(LTCG), taxed at 15% (for his tax bracket)....so you owe $15,000 in taxes on this sale.  However, there's this little problem about the depreciation he's taken over…