A Colorado investment property sold for $850,000. The original purchase price was $600,000. The owner's capital gains tax rate is 20%. Assuming a $150,000 gain after deducting improvements and depreciation recapture, what is the capital gains tax owed?
Why $30,000 Is Correct
Answer B: $30,000
Exam Tip: Real Estate Math
Math questions are formula-based. Memorize the key formulas: commission splits, proration, cap rate (NOI ÷ Value), GRM (Price ÷ Gross Rent), and LTV (Loan ÷ Value). Practice converting between annual and monthly figures.
Key Real Estate Math Terms in This Question
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Key Terms to Know
A reduction in the value of an improvement (building) over time due to physical deterioration, functional obsolescence, or external factors.
Loan-to-Value Ratio (LTV)The ratio of a mortgage loan amount to the appraised value or purchase price of a property, expressed as a percentage.
1031 ExchangeA tax-deferred exchange allowing investors to sell one investment property and reinvest proceeds in a like-kind property while deferring capital gains taxes.
Option ContractA contract giving the buyer the right, but not the obligation, to purchase a property at a specified price within a specified time period.
Math Concepts
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