Question

Tyler Holdlong owns a small retail property that he inherited from his father. There are no mortgages or interest expenses connected with the property. Tyler takes an annual cost recovery expense of $3,000. The property has a monthly gross income of $3,500 and monthly operating expenses of $1,100. Tyler's taxable income from this property will be taxed at a rate of 25%. What is the tax liability for the year?

Answer 1

Answer:

$6450

Explanation:

Given that

Monthly gross income = 3500

Monthly operating expenses = 1100

Tax rate = 25%

Annual cost recovery expenses = 3000

Recall that, taxable income is income less expenses.

Therefore,

Annual gross income = 3500 × 12

= 42000

Annual operating expense = 1100 × 12

= 13200

Thus,

Taxable income = 42000 - 13200 - 3000

= 25800

Tax liability = tax rate × taxable income

= 0.25 × 25800

= $6450

Answer 2

Answer:

$6450

Explanation:

We have the following as the expenses

We have the annual cost recovery as = $3000

We have the monthly gross income as = $3500

We have monthly operating expenses as = $1100

And also, the tax rate is given as = 25%

If we can remember, taxable income is incomeless expenses.

With that, we are going to have

Annual gross income multiply by 12 since it annually = $3500 × 12

= $42000

Annual operating expense multiply by 12 since it is annually = $1100 × 12

= $13200

There our taxable income will be

Taxable income = $42000 - $13200 - 3000

= $25800

The tax liability will given as

Tax liability = tax rate × taxable income

Tax liability = 0.25 × 25800

Tax liability = $6450 which is the answer