| Course | GF592 Income Tax Planning and Strategies |
|---|---|
| Unit | Unit 5 |
| Paper type | Property transaction workup |
| Length | About 920 words, 6 pages double-spaced |
| Format | APA 7 student paper |
| School | Purdue University Global |
| Program | MS in Finance |
| Updated | October 2026 |
Free sample paper for GF592 Unit 5
A Character for Every Dollar: A Unit 5 Property Transaction Workup on a Widow's Rental House
[Student Name]
Purdue University Global
GF592: Income Tax Planning and Strategies
Unit 5 Property Transaction Workup
[Instructor Name]
[Date]
The seller, the property and all amounts are composite and illustrative; tax figures use federal law for tax year 2025 for a single filer aged 68; the sources cited are real.
The Basis Schedule
The purchase price of $380,000 is split between land and building, because land is never depreciated. Using the county assessor's ratio, $70,000 is land and $310,000 is building. A residential rental building is written off in equal amounts over 27.5 years, and the first and last months each count as half a month (Internal Revenue Service, 2025a).
1. First year, placed in service in January: 11.5 months of depreciation, $10,803.
2. Eight full years: $11,273 a year, $90,182 in total.
3. Year of sale, sold in June: 5.5 months, $5,167.
4. Total depreciation: $106,152.
Depreciation reduces basis whether or not the owner claimed it. The rule is allowed or allowable, so a seller who skipped the deduction in some years still reduces basis by the amount she could have taken (Internal Revenue Service, 2025b). Her adjusted basis is $380,000 less $106,152, or $273,848.
The Gain
1. Amount realized: $585,000 less 6 percent selling costs of $35,100, or $549,900.
2. Adjusted basis: $273,848.
3. Gain: $276,052.
The Character Split
1. Unrecaptured Section 1250 gain: $106,152, equal to the depreciation taken. This portion is taxed at ordinary rates but no higher than 25 percent.
2. Long-term capital gain: $169,900, the rise in value above the original purchase price, taxed at the capital gain rates.
The depreciation that lowered her taxes at ordinary rates for nine years comes back on sale at up to 25 percent, while only the true rise in value enjoys the lower capital gain rate.
Tax on a Sale This Year
Her other income is $48,000 from a pension and required retirement account withdrawals. Without the sale, her taxable income would be about $24,250 and her federal tax about $2,672.
With the sale, her adjusted gross income rises to $324,052. That has three effects. The new deduction for taxpayers 65 and older, up to $6,000, phases out completely at that income. The unrecaptured gain fills the 12, 22 and 24 percent brackets. And a further 3.8 percent levy, charged on investment gains above a threshold, falls on the $124,052 of income above the $200,000 threshold for single filers, adding $4,714.
Total federal tax with the sale is about $55,782. The added tax from selling this year is about $53,110: roughly $22,192 on the unrecaptured gain, $25,485 on the capital gain at 15 percent, $4,714 of net investment income tax and the loss of her senior deduction.
Path 2: An Installment Sale
If the buyer pays over five years, the gain is reported as payments are received, about $55,210 a year (Internal Revenue Service, 2025c). The unrecaptured Section 1250 portion is reported first, so the first two years carry most of it.
Each year her income would be about $103,210, well below the $200,000 threshold, so the net investment income tax disappears. Some capital gain would fall in the 0 percent bracket in later years. The added tax over five years would total about $35,262, roughly $17,848 less than selling outright.
The cost is credit risk. She would hold the buyer's note secured by the house, and if the buyer defaulted she would have to foreclose. Interest on the note would be taxable income as it is paid.
Path 3: Hold Until Death
If she keeps the house, her heirs would receive a basis equal to its value at her death under Section 1014. The entire $276,052 gain, including the depreciation portion, would never be taxed. The cost is practical rather than financial: she would remain a landlord into her seventies, with repairs, tenants and vacancies, or pay a manager about 8 to 10 percent of rents.
Questions to Settle Before Deciding
Three facts would change the comparison and should be confirmed first. Her health and expected lifespan matter most to the third path, since the basis step-up only helps if she still owns the house at death; if she needed to sell within a few years anyway, holding would merely delay the same tax. Her need for cash matters to the second: an installment note pays her over five years, so if she wants a lump sum for a move to a retirement community, the note may not fit. And her state's tax treatment matters to all three, because most states tax the gain as ordinary income, and some offer their own exclusions for older residents. A workup that answered only the federal question would leave her without the information she needs to choose.
Comparison
1. Sell now: about $53,110 of added tax this year, full cash today.
2. Installment sale: about $35,262 over five years, cash spread out, buyer credit risk.
3. Hold for life: no tax on the gain, ongoing work or management cost, cash only from rents.
The right path depends on what she wants the money for and how much longer she is willing to manage the property. If she wants to stop being a landlord and leave a larger estate, the installment sale is a middle course. If her heirs' inheritance matters most and she can hire a manager, holding the house saves the most tax.
References
Internal Revenue Service. (2025a). Residential rental property (Publication 527). https://www.irs.gov/publications/p527
Internal Revenue Service. (2025b). Basis of assets (Publication 551). https://www.irs.gov/publications/p551
Internal Revenue Service. (2025c). Installment sales (Publication 537). https://www.irs.gov/publications/p537
Reading the GF 592 Unit 5 instructions
In Unit 5, GF592 hands you a property sale and asks for more than the gain. Build the basis first: separate land from building, depreciate the building on the correct schedule and apply the allowed-or-allowable rule. Compute the amount realized after selling costs and the gain. Then give every dollar of gain its character, because depreciation recapture on real property and ordinary capital gain are taxed differently. Price a sale this year against the client's other income, including any effect on deductions and the net investment income tax. The planning half of the assignment compares at least two other paths, such as an installment sale, a like-kind exchange or holding the property, each with its tax cost and its practical cost. End with questions the planner must settle with the client before deciding, and cite the IRS publications on rental property, basis and installment sales in APA 7.
How the GF 592 Unit 5 example is put together
The basis schedule splits the $380,000 price using the assessor's ratio and depreciates $310,000 of building over 27.5 years with half-month timing, giving $106,152 in total. A short gain section reaches $276,052. The character split separates the depreciation portion, taxed at no more than 25 percent, from the rise in value, and the highlighted sentence explains why. Her tax without a sale is about $2,672 on $48,000 of pension and withdrawals. With a sale, her income jumps to $324,052, her senior deduction disappears and $4,714 of net investment income tax applies. Path 2 spreads the gain over five years and drops the added tax to about $35,262, with the buyer's credit risk named. Path 3 relies on the basis step-up under Section 1014. A section on health, cash needs and state tax precedes a three-line comparison and a recommendation tied to her goals.
Where the points sit in the GF592 Unit 5 rubric
Points in this GF592 workup are spread across the computation and the planning. The basis schedule and the gain must be correct and shown, since every later figure depends on them, and the allowed-or-allowable rule is a frequent test of understanding. Instructors give substantial weight to the character split: a submission that taxes the whole gain at 15 percent misstates the result by thousands. Pricing the sale against the client's actual income, with the effects on deductions and the investment income tax, shows the writer can see the whole return rather than one schedule. The comparison of paths is where the planning credit sits, and each path needs both a tax figure and a practical cost. Questions about health, cash and state law show judgment beyond arithmetic. IRS Publications 527, 551 and 537, cited in APA 7, support the depreciation, basis and installment rules used.
Common GF592 Unit 5 mistakes, and how to avoid them
The GF592 Unit 5 workup is often lost in the basis schedule. Students depreciate the land, use a full first month instead of half a month, or reduce basis only by the depreciation actually claimed. Many then tax the entire gain at the long-term capital gain rate and never separate the recapture portion. Others compute the tax on the gain alone, ignoring how a large gain removes the senior deduction and adds the investment income tax on income above the threshold. On the planning side, comparisons often list an installment sale without noting the buyer's credit risk, or recommend holding for the basis step-up without asking whether the client can or wants to remain a landlord. Like-kind exchanges get suggested for sellers who want out of real estate. Check that your paths match the client's stated goal and that each carries a dollar figure the client can compare.
Get a GF592 Unit 5 example written to your instructions
Provide the purchase, improvement, depreciation and sale facts from your GF592 Unit 5 prompt, the seller's other income, the named tax year and the rubric. The custom workup traces basis, computes gain, splits character, tests the surtax and compares selling now with at least one alternative. Coursework only, never tax advice. First sample free; 24-48h. The paper above is an original model document written by our desk, not a submitted student paper and not an official Purdue University Global document.
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GF592 Unit 5 questions, answered
What does allowed or allowable mean for basis?
Basis is reduced by the depreciation the owner was entitled to take, whether or not it was actually claimed. A seller who never deducted depreciation still has a lower basis at sale. The sample states the rule and uses the full 106,152, since omitting unclaimed amounts would understate the gain and misstate its character on the return.
Why is part of the gain taxed at a different rate?
Gain attributable to depreciation on real property, called unrecaptured Section 1250 gain, is taxed at a rate capped at 25 percent for individuals, while the remainder of a long-term gain uses the regular capital gain rates. The sample splits the 276,052 into those two layers before applying any rate, then adds the net investment income tax where it applies.
Should a like-kind exchange be considered?
If the facts support it, yes. An exchange defers the gain by carrying basis into replacement property, which suits an investor who wants to keep owning real estate. The sample's seller wants to stop being a landlord, so the workup mentions an exchange in one sentence and explains why it does not fit her stated goal.
Where can I find a free GF592 Unit 5 sample paper?
This page carries a full GF592 Unit 5 property transaction workup on a widow's rental house, with the basis schedule, a $276,052 gain split by character, the tax on three paths and APA 7 references.
What is unrecaptured Section 1250 gain in GF592 Unit 5?
This label covers the slice of a depreciated building's gain that matches the depreciation taken. It is taxed at ordinary rates but no higher than 25 percent, while the rest of a long-term gain uses the capital gain rates. In the sample that portion is $106,152.