f. An individual bought a small house as an investment for $125,000 cash (land $25k+building $100k). She rents it for $12,000 per year and she hopes to sell it for 155,000 5 years later (land $25k+building $130k). She is in a 23% tax bracket and the capital gains rate is 15%. What is the rate of return of this investment? To simplify the calculations, assume purchase January 1st and sale Dec 31st and ignore the half-month depreciation at the beginning and end of ownership. Note that she needs to claim depreciation and pay taxes on the rent and the purchase-sale price differential. You can use Excel. For Married Individuals Filing Joint Returns Tax For Single Filers Rate 10% Up to $9,950 Up to $19,900 12% $9,951 to $40,525 $19,901 to $81,050 For Heads of Households Up to $14,200 $14,201 to $54,200 Page Break 22% $40,526 to $81,051 to $172,750 $86,375 24% $86,376 to $172,751 to $329,850 $164,925 32% $164,926 to $329,851 to $418,850 $289,425 35% $289,426 to $523,600 $418,851 to $628,300 37% $523,601 or more.. $628,301 or more Source: Internal Revenue Service $54,201 to $86,350 $86,351 to $164,900 $164,901 to $209,400 $209,401 to $523,600 $523,601 or more