Answer:
gain recognized on sale = $82,300
ordinary gain = $16,460
capital gain = $65,840
gain is $82,300
Explanation:
given data
purchased a warehouse = $315,000
sold warehouse = $80,000
assumption of a mortgage = $225,000
deducted = $92,300
solution
first we get here Actual cost of warehouse that is
Actual cost of warehouse = Purchase cost - Depreciation ..................1
put here value and we get
Actual cost of warehouse = $315,000 - $92,300
Actual cost of warehouse = $222,700
and
now we gain recognized on sale that is express as
gain recognized on sale = Sale price of warehouse + mortgage amount - actual cost ..........................2
put here value and we get
gain recognized on sale = $80,000 +$225,000 - $222,700
gain recognized on sale = $82,300
and
now we get first we get ordinary gain and we know ordinary gain is the 20% of the gain amount
as the tax rate is 20%
so ordinary gain is
ordinary gain = $82,300 × 20%
ordinary gain = 16,460
so here capital gain will be
capital gain = Gain - Ordinary gain ...................3
put here value
capital gain = $82,300 - $16,460
capital gain = $65,840
and
when Lynn is a non corporate business than he will have only gain part of $82,300 because here ordinary gain and capital gain is not recognized under non corporate business
so gain is $82,300
