Substrate Record: qid 666

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qid 666 · business

Question: Mr. Fields is considering selling a property acquired 15 years ago for $65,000; $10,000 was for the land, and $55,000 was for the building. Mr. Fields can now sell the property for $120,000. He can also keep it and continue to collect the annual rent from the building. If Mr. Fields decides to keep the property, he will keep it for another 25 years and will, at that time, sell it for $40,000. The annual rent receipts will be $5,930 for the next twenty-five years. Should Mr. Fields sell the property now or in twenty-five years? Assume that the building, but not the land, has been depreciated using the straight line method at 2%, long term gains are taxable at a rate of 25%, Mr. Fields' income tax rate is 56%, the minimum attractive rate of return after taxes is 2(1/2)%, and taxes will hold for the next 25 years. Make all calculations to the nearest dollar.

1. Mr. Fields should lease the property to a new tenant for a higher annual rent
2. Mr. Fields should sell the property now for $120,000
3. Mr. Fields should keep the property for 25 more years
4. Mr. Fields should convert the building into a personal residence
5. Mr. Fields should rent the property for another 15 years
6. Mr. Fields should sell the property after 10 years
7. Mr. Fields should renovate the property and then decide whether to sell or keep it
8. Mr. Fields should exchange the property for a similar one to defer taxes
9. Mr. Fields should hold the property indefinitely for future generations
10. Mr. Fields should donate the property to a charitable organization for a tax write-off

Our answer: B. Mr. Fields should sell the property now for $120,000 Source quote machine-checked (exact quote)

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