How do Capital Gain Taxes work on a commerical building ? See my example?

Question

I bought a commerical building in 2000 for 80K. Selling now for 380K. What will own in capital gain durring tax time ?

Answer 1

You have been allowed depreciation over 39 years, so you have about 20% of the cost already depreciated. If you have not made improvements to the property, your basis is about $64K and your gain is about $316K (minus sales commissions). You will pay long-term capital gains taxes of 15% on the gain, or about $47K.

If you have made improvements to the property, you would add that to the basis, and subtract depreciation on the improvements over the years you had those improvements in place, to arrive at your adjusted basis. Then subtract your adjusted basis from $380K to arrive at the gain.

Answer 2

The basic formula for finding tax will be:
Net Sales Price minus Adjusted Basis times Tax Rate.

The Adjusted Basis is the only tricky part. That usually includes Original Cost plus Capital Improvements not previously deducted as current expense and Adjustment to Depreciation for any accelerated Depreciation taken.

regards,
Uncle Sam

Answer 3

15% of capital gain or file 1031 exchange to carry forward gain without tax liability.

Search for 1031 excange on wikipedia for more info.

Answer 4

Did you like to own investment property? Would you like to leverage your tax dollars into another investment property? Try a 1031 exchange.

When estimating your tax liability, do not forget about state taxes. If your property is in California, add another 9.3% of your gain (300,000 X 9.3% = $27,900)

Answer 5

15% of your net gain.