Question: Five years ago you purchased a small apartment complex for $ 1 million. You borrowed $ 7 0 0 , 0 0 0 at 1

Five years ago you purchased a small apartment complex for $

1

million. You borrowed $

700, 000

12

percent for

25

years with monthly payments. The original depreciable basis was $

750, 000

and you have used

27 1 / 2 -

year straight

-

line depreciation over the five year holding period. Assume no capital expenditures have been made since acquisition. If you sell the property today for $

1, 270, 000

in a fully taxable sale:

3 .

What will be the taxes due on sale? Assume

6

percent selling costs.

33

percent ordinary tax rate, a

15

percent capital gain tax rate, and a

25

percent recapture rate.

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