Question 5 1. You purchase a house for $150,000 that you intend to rent out. For taxation purposes, what is the cumulative depreciation at the end of the 8th year? 2. Assuming that you earn $120,000, what will the yearly and cumulative tax saving be for this investment after the 8th year? (Using a straight/ordinary tax rate of 25%) 3. What will the book value be at the end of the 8th year? Ordinary tax rate is 25% Capital gains will be levied at a 15% 4. Real estate property will typically increase in value over time. You intend to sell the property after the 8th year and estimate that the market value will be $200,000. What will you have to pay in taxes (Ordinary & Capital gains) as a result of the sale? Table A-7. Nonresidential Real Property Mid-Month Convention Straight Line-31.5 Years Year Month property placed in service 7 11 0.6519 3.042% 3.175 3.175 3.174 3.175 2.778% 3.175 3.174 3.175 3.174 25134 3.175 3.175 3.174 3.175 2.24996 3.175 3.174 3.175 3.174 1.98496 3.175 3.175 3.174 3.175 1.720% 3.175 3.174 3.175 3.174 1.455% 3.175 3.175 3.174 3.175 1.190% 3.175 3.175 3.175 3.174 0.926% 3.175 3.175 3.174 3.175 3.175 3.175 3.175 3.174 0.397% 3.175 3.175 3.174 3.175 0.132% 3.175 3.175 3.175 3.174 3.174 3.175 3.174 3.175 3.174 3,175 3.174 3.175 3.174 3.175 3.174 3.175 3.174 3.175 3.174 3.175 3.174 3.175 3.174 3.175 3.174 3.175 3.174 3.175 3.174 3.175 3.174 3.175 3.174 3.175 3.174 3.175 3.174 3.175 3.174 3.175 3.174 3.175 3.174 3.175 3.174 3.175 3.174 3.175 3.174 3.175 3.174 3.175 3.174 3.175 3.174 3.175 3.174 3.175 3.174 3.175 3.174 3.175 3.175 3.174 3.174 3.175 3.175 3.174 3.175 3.174 3.175 3.174 3.175 3.174 3.175 3.174 3.175 3.174 3.175 3.174 3.175 3.174 3.175 3.174 3.175 3.174 3.175 3.174 3.175 3.174 3.175 3.174 3.175 3.174 3.175 3.174 3.175 3 174 3.175 3.174 3.175 3.174 3.175 3.174 3.175 3.174 3.175 3.174 3.175 3.174 3.175 3.174 3.175 3.174 3.175 3.174 3.175 3.174 3.175 3.174 3.175 3.174 3.175 3.174 3.175 3.174 3.175 3.174 3.175 3.174 3.175 3.174 3.175 3.174 3.174 3.175 3.174 3.175 3.174 3.175 3.174 3.175 3.174 3.175 3.174 3.175 3.174 3.175 3.174 3.175 3.174 3.175 3.174 3.174 3.175 3.174 3.175 3.174 3.175 3.174 3.175 3.174 3.175 3.174 3.175 3.174 3175 3.174 3.175 3.174 3.175 3.174 3.175 3.174 3.175 3 174 3.175 3.175 3.175 3.174 3.175 3.175 3.175 3.174 3.175 3.174 3.175 3.174 3.175 3.174 3.175 3.174 3.175 3.174 3.175 3.174 3.175 3.174 3.175 3.174 3.175 3.174 3.175 3.174 3.175 3.174 3.175 3.174 3.175 3.174 3.175 3.174 3.175 3 174 3.175 3.174 3.175 3.174 3.175 3.174 3.174 3.175 3174 3.175 3.174 3.175 3174 3.175 3.174 3.175 3.174 3.175 3.174 3.175 3.174 3.175 3.174 3.175 3.174 174 3.175 3.174 1.720 3.175 1.984 3.174 2249 3.175 2513 3.174 2.778 3.175 3.042 3.174 3.175 0.132 3.175 3.174 0.397 3.174 3.175 0.661 3.175 1114 1174 3.175 1.100 3.175 3.174 0.005 1455 Question 5 1. You purchase a house for $150,000 that you intend to rent out. For taxation purposes, what is the cumulative depreciation at the end of the 8th year? 2. Assuming that you earn $120,000, what will the yearly and cumulative tax saving be for this investment after the 8th year? (Using a straight/ordinary tax rate of 25%) 3. What will the book value be at the end of the 8th year? Ordinary tax rate is 25% Capital gains will be levied at a 15% 4. Real estate property will typically increase in value over time. You intend to sell the property after the 8th year and estimate that the market value will be $200,000. What will you have to pay in taxes (Ordinary & Capital gains) as a result of the sale? Table A-7. Nonresidential Real Property Mid-Month Convention Straight Line-31.5 Years Year Month property placed in service 7 11 0.6519 3.042% 3.175 3.175 3.174 3.175 2.778% 3.175 3.174 3.175 3.174 25134 3.175 3.175 3.174 3.175 2.24996 3.175 3.174 3.175 3.174 1.98496 3.175 3.175 3.174 3.175 1.720% 3.175 3.174 3.175 3.174 1.455% 3.175 3.175 3.174 3.175 1.190% 3.175 3.175 3.175 3.174 0.926% 3.175 3.175 3.174 3.175 3.175 3.175 3.175 3.174 0.397% 3.175 3.175 3.174 3.175 0.132% 3.175 3.175 3.175 3.174 3.174 3.175 3.174 3.175 3.174 3,175 3.174 3.175 3.174 3.175 3.174 3.175 3.174 3.175 3.174 3.175 3.174 3.175 3.174 3.175 3.174 3.175 3.174 3.175 3.174 3.175 3.174 3.175 3.174 3.175 3.174 3.175 3.174 3.175 3.174 3.175 3.174 3.175 3.174 3.175 3.174 3.175 3.174 3.175 3.174 3.175 3.174 3.175 3.174 3.175 3.174 3.175 3.174 3.175 3.174 3.175 3.174 3.175 3.175 3.174 3.174 3.175 3.175 3.174 3.175 3.174 3.175 3.174 3.175 3.174 3.175 3.174 3.175 3.174 3.175 3.174 3.175 3.174 3.175 3.174 3.175 3.174 3.175 3.174 3.175 3.174 3.175 3.174 3.175 3.174 3.175 3.174 3.175 3 174 3.175 3.174 3.175 3.174 3.175 3.174 3.175 3.174 3.175 3.174 3.175 3.174 3.175 3.174 3.175 3.174 3.175 3.174 3.175 3.174 3.175 3.174 3.175 3.174 3.175 3.174 3.175 3.174 3.175 3.174 3.175 3.174 3.175 3.174 3.175 3.174 3.174 3.175 3.174 3.175 3.174 3.175 3.174 3.175 3.174 3.175 3.174 3.175 3.174 3.175 3.174 3.175 3.174 3.175 3.174 3.174 3.175 3.174 3.175 3.174 3.175 3.174 3.175 3.174 3.175 3.174 3.175 3.174 3175 3.174 3.175 3.174 3.175 3.174 3.175 3.174 3.175 3 174 3.175 3.175 3.175 3.174 3.175 3.175 3.175 3.174 3.175 3.174 3.175 3.174 3.175 3.174 3.175 3.174 3.175 3.174 3.175 3.174 3.175 3.174 3.175 3.174 3.175 3.174 3.175 3.174 3.175 3.174 3.175 3.174 3.175 3.174 3.175 3.174 3.175 3 174 3.175 3.174 3.175 3.174 3.175 3.174 3.174 3.175 3174 3.175 3.174 3.175 3174 3.175 3.174 3.175 3.174 3.175 3.174 3.175 3.174 3.175 3.174 3.175 3.174 174 3.175 3.174 1.720 3.175 1.984 3.174 2249 3.175 2513 3.174 2.778 3.175 3.042 3.174 3.175 0.132 3.175 3.174 0.397 3.174 3.175 0.661 3.175 1114 1174 3.175 1.100 3.175 3.174 0.005 1455