We don't know his depreciation basis, I am assuming he never claimed depreciation in the past 10 years, nevertheless, he still need to pay depreciation recapture. Assuming his income tax rate is 22%
(($420000/27.5)*10)*22% = 33600, there is the 3万。
Of course, his depreciation basis should not be 42万，But I suspect as a tax novice he thought depreciation basis = purchase price. In fact it is only the purchase price for the structure, not land.
So in fact the recapture should be a fraction of 3万，I am not sure what land/structure value ratio in NJ is, if it's 1:1, then the recapture should be 1.5 (half).
