Chapter $11$ Practice Assignment

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Problem $11-65($LO $11-6)($Algo$)$

Ken sold a rental property for $$725,000.$ He received $$161,000$ in the current year and $$141,000$ each year for the next four years. Of the sales price, $$472,500$ was allocated to the building, and the remaining $$252,500$ was allocated to the land. Ken purchased the property several years ago for $$452,000.$ When he initially purchased the property, he allocated $$295,000$ of the purchase price to the building and $$157,000$ to the land. Ken has claimed $$17,000$ of depreciation deductions over the years against the building.

Ken had no other sales of $$1231$ or capital assets in the current year.

Required:

a$.$ For the year of the sale, determine Ken's recognized gain or loss.

b$.$ For the year of the sale, determine character of Ken's gain, and calculate Ken's tax due because of the sale $($assuming his marginal ordinary tax rate is $32$ percent$).$

Complete this question by entering your answers in the tabs below.

Required $A$

Required B

For the year of the sale, determine Ken's recognized gain or loss.

Note: Round your final answers to the nearest whole dollar amount. Input all the values as positive numbers.

$\backslash$table$[[$Description$,$Amount,$],[(1)$ Amount Realized,$$,725,000,],[(2)$ Adjusted Basis,,$],[(3)$ Gain realized,,$],[(4)$ Gross Profit Percentage,,$\%$