1. Brian Brewster sold property to a buyer who paid him $400,000 cash and the buyer assumed Brian's existing mortgage of $150,000. The property had cost $250,000 and he had made improvements of $50,000. Depreciation of $100,000 has been properly claimed and selling expenses were $20,000. What is the amount of gain realized? (A) $100,000 (B) $200,000 (C) $250,000 (D) $280,000 (E) $330,000

E. You have to watch where it says he assumed his existing mortgage.

gain on sale of property = $330,000

so correct option is E) $330,000

Explanation:

given data

sale price = $400,000

existing mortgage = $150,000

property cost = $250,000

improvements = $50,000

Depreciation = $100,000

selling expenses = $20,000

to find out

the amount of gain realized

solution

we find first net sale price that is

net sale price = sale price + existing mortgage - selling expenses ... 1

put here value we get

net sale price = $400,000 + $150,000 - $20,000

net sale price = $530,000

and

net book value of property is

net book value = property cost + improvements - Depreciation ... 2

put here value we get

net book value = $250,000 + $50,000 - $100,000

net book value = $200,000

so

gain on sale of property is

gain on sale of property = net sale price - net book value of property ... 3

put here value we get

gain on sale of property = $530,000 - $200,000

gain on sale of property = $330,000

so correct option is E) $330,000