It is currently 25 Feb 2018, 17:00

Close

GMAT Club Daily Prep

Thank you for using the timer - this advanced tool can estimate your performance and suggest more practice questions. We have subscribed you to Daily Prep Questions via email.

Customized
for You

we will pick new questions that match your level based on your Timer History

Track
Your Progress

every week, we’ll send you an estimated GMAT score based on your performance

Practice
Pays

we will pick new questions that match your level based on your Timer History

Not interested in getting valuable practice questions and articles delivered to your email? No problem, unsubscribe here.

Close

Request Expert Reply

Confirm Cancel

Events & Promotions

Events & Promotions in June
Open Detailed Calendar

A person claiming profits from the sale of a house must pay taxes on a

  new topic post reply Question banks Downloads My Bookmarks Reviews Important topics  
Author Message
TAGS:

Hide Tags

Expert Post
Math Expert
User avatar
V
Joined: 02 Sep 2009
Posts: 43917
A person claiming profits from the sale of a house must pay taxes on a [#permalink]

Show Tags

New post 21 Jan 2018, 02:45
Expert's post
1
This post was
BOOKMARKED
00:00
A
B
C
D
E

Difficulty:

  85% (hard)

Question Stats:

47% (03:11) correct 53% (02:28) wrong based on 34 sessions

HideShow timer Statistics

A person claiming profits from the sale of a house must pay taxes on all profit based on the difference in the purchase price and the selling price. Profit up to and including 20% of the purchase price are taxed at a rate of 6%, while all profits beyond 20% of the purchase price are taxed at 10%. If Family G sold their house for $228,000 and they purchased the house 15 years ago for $164,000, how much do they have to pay in taxes?

A. $6400
B. $5888
C. $4438
D. $3120
E. $1968
[Reveal] Spoiler: OA

_________________

New to the Math Forum?
Please read this: Ultimate GMAT Quantitative Megathread | All You Need for Quant | PLEASE READ AND FOLLOW: 12 Rules for Posting!!!

Resources:
GMAT Math Book | Triangles | Polygons | Coordinate Geometry | Factorials | Circles | Number Theory | Remainders; 8. Overlapping Sets | PDF of Math Book; 10. Remainders | GMAT Prep Software Analysis | SEVEN SAMURAI OF 2012 (BEST DISCUSSIONS) | Tricky questions from previous years.

Collection of Questions:
PS: 1. Tough and Tricky questions; 2. Hard questions; 3. Hard questions part 2; 4. Standard deviation; 5. Tough Problem Solving Questions With Solutions; 6. Probability and Combinations Questions With Solutions; 7 Tough and tricky exponents and roots questions; 8 12 Easy Pieces (or not?); 9 Bakers' Dozen; 10 Algebra set. ,11 Mixed Questions, 12 Fresh Meat

DS: 1. DS tough questions; 2. DS tough questions part 2; 3. DS tough questions part 3; 4. DS Standard deviation; 5. Inequalities; 6. 700+ GMAT Data Sufficiency Questions With Explanations; 7 Tough and tricky exponents and roots questions; 8 The Discreet Charm of the DS; 9 Devil's Dozen!!!; 10 Number Properties set., 11 New DS set.


What are GMAT Club Tests?
Extra-hard Quant Tests with Brilliant Analytics

Manager
Manager
avatar
S
Joined: 23 Feb 2017
Posts: 60
GMAT ToolKit User Premium Member
Re: A person claiming profits from the sale of a house must pay taxes on a [#permalink]

Show Tags

New post 21 Jan 2018, 04:37
Purchase Price = 164,000
Selling price = 228,000

Profit = S.P. - C.P. = 64,000

Tax @20% of PP = 32800 @ 6% = 1968
Tax above 20 % of PP = 64000-38200 = 31200 @ 10% = 3120
Total tax = 1968+3120 = 5088

Bunuel can you please confirm the answer.
_________________

+1 Kudos if you find it helpful.

Board of Directors
User avatar
G
Status: QA & VA Forum Moderator
Joined: 11 Jun 2011
Posts: 3326
Location: India
GPA: 3.5
WE: Business Development (Commercial Banking)
GMAT ToolKit User Premium Member
Re: A person claiming profits from the sale of a house must pay taxes on a [#permalink]

Show Tags

New post 21 Jan 2018, 07:23
Bunuel wrote:
A person claiming profits from the sale of a house must pay taxes on all profit based on the difference in the purchase price and the selling price. Profit up to and including 20% of the purchase price are taxed at a rate of 6%, while all profits beyond 20% of the purchase price are taxed at 10%. If Family G sold their house for $228,000 and they purchased the house 15 years ago for $164,000, how much do they have to pay in taxes?

A. $6400
B. $5888
C. $4438
D. $3120
E. $1968


Profit Earned is 64000

% Profit earned by the transaction is \(\frac{( 228,000 - 164,000 )}{164,000}*100\) = 39.02 %

Tax Upto 20% of Profit is 20%*64000*6% = 768
Tax Above 20% of Profit is 80%*64000*10% = 5120

So, Total Tax is 5888 , answer will be (B)

_________________

Thanks and Regards

Abhishek....

PLEASE FOLLOW THE RULES FOR POSTING IN QA AND VA FORUM AND USE SEARCH FUNCTION BEFORE POSTING NEW QUESTIONS

How to use Search Function in GMAT Club | Rules for Posting in QA forum | Writing Mathematical Formulas |Rules for Posting in VA forum | Request Expert's Reply ( VA Forum Only )

Senior Manager
Senior Manager
User avatar
G
Joined: 23 Jun 2012
Posts: 344
Location: Pakistan
Concentration: Strategy, International Business
GPA: 3.76
GMAT ToolKit User Reviews Badge
Re: A person claiming profits from the sale of a house must pay taxes on a [#permalink]

Show Tags

New post 22 Jan 2018, 22:03
Answer is B
the profit earned is 64000. Now 20% of this profit will be 12800
taking 6% of 12800 will be 768----1)
Now beyond 20% of 12800 means 80% of 128000.
We will get 0.8 of 128000 as 51200. This amount 51200 is taxed at 10%
0.1 of 51200 = 5120---2)
adding 1 and 2
768+ 5120 = 5888
_________________

Push yourself again and again. Don't give an inch until the final buzzer sounds. -Larry Bird
Success isn't something that just happens - success is learned, success is practiced and then it is shared. -Sparky Anderson
-S

Intern
Intern
User avatar
B
Joined: 22 Mar 2017
Posts: 28
GMAT 1: 680 Q48 V35
A person claiming profits from the sale of a house must pay taxes on a [#permalink]

Show Tags

New post 29 Jan 2018, 07:22
mandeey wrote:
Purchase Price = 164,000
Selling price = 228,000

Profit = S.P. - C.P. = 64,000

Tax @20% of PP = 32800 @ 6% = 1968
Tax above 20 % of PP = 64000-38200 = 31200 @ 10% = 3120
Total tax = 1968+3120 = 5088

Bunuel can you please confirm the answer.



I got right the same result (5088 rather than 5888), and this is because we take for granted that the part for which 6% of tax is paid is the amount of the profit that stands for the 20% (including) of the purchase price and the rest (64,000 - 38,200) will be tax at 10%.


Bunuel, can you please confirm whether this is right? Or otherwise, explain us why we are mistaken, because the line "Profit up to and including 20% of the purchase price are taxed at a rate of 6%" clearly expresses that te 20% is taken from the purchase price.

Thanks!


-
_________________

If it helped, some kudos would be more than welcome! :-)


King regards,

Rooigle

A person claiming profits from the sale of a house must pay taxes on a   [#permalink] 29 Jan 2018, 07:22
Display posts from previous: Sort by

A person claiming profits from the sale of a house must pay taxes on a

  new topic post reply Question banks Downloads My Bookmarks Reviews Important topics  


GMAT Club MBA Forum Home| About| Terms and Conditions| GMAT Club Rules| Contact| Sitemap

Powered by phpBB © phpBB Group | Emoji artwork provided by EmojiOne

Kindly note that the GMAT® test is a registered trademark of the Graduate Management Admission Council®, and this site has neither been reviewed nor endorsed by GMAC®.