Bill Holdfast owns a small retail property that he inherited from his father. There are no mortgages or interest expenses connected with the property. Bill takes an annual cost recovery expense of $5,000. The property has a monthly gross income of $1,500 and monthly operating expenses of $500. Bill's taxable income from this property will be taxed at a rate of 30%. What is the tax liability for the year?

Tax Liability = $2,100

Explanation:

given data

annual cost recovery expense = $5,000

monthly gross income = $1,500

monthly operating expenses = $500

tax rate = 30%

solution

we get here tax liability for the year that is express as

Tax Liability = [ (Rent for 1 year) - Annual cost recovery expense - (monthly operating expense in 1 year) ] * tax rate ... 1

put here value and we will get

Tax Liability = [ (1500 * 12) - 5000 - (500 * 12) ] * 30%

Tax Liability = $2,100