Use the Following Information to Answer the Following Two Questions

question 16

Multiple Choice

Use the following information to answer the following two questions. You are making a 10-year cash flow pro-forma for a lender, on a non-residential commercial building which you have just purchased (on January 1) and plan to own for 10 years (the maturity of the loan you are requesting) . The building has a single tenant in a 20-year lease that commenced at the time of building purchase (January 1) .
-Purchase Price: $3,000,000 including $500,000 in assessed land value.
-Tenant Improvement Expenditures (all spent on building made at time of purchase, beginning of lease) : $1,000,000.
-Leasing Brokerage Commission (paid at time of purchase, beginning of lease) : $300,000.
-Capital Gains Tax Rate (on economic gain) : 15%.
-Recapture Tax Rate: 25%.
-Ordinary Income Tax Rate: 35%.
Be completely realistic in your treatment of all sources of capital gains and recapture tax.
-By how much would the tax on the reversion increase (looking only for the increment here) if the projected net resale proceeds were $4,500,000 instead of the $4,000,000 of the previous question?

• A) $75,000.
• B) $105,000.
• C) $175,000.
• D) $225,000.
• E) None of the above.

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Definitions:

Conceptual Distinctions

The differentiation between ideas or theories that allows for a clearer understanding and categorization of thoughts or phenomena.

Universal Grammar

A theory in linguistics proposing that the ability to acquire language is innate to humans and that all human languages share a common underlying structure.

Wernicke's Area

A region in the brain associated with understanding spoken language.

Aphasia

A condition characterized by the loss or impairment of the ability to communicate verbally or in writing, typically due to damage to the brain.