sale are reduced 21. To calculate a gain or loss on the sale by which of the fol
ID: 2548602 • Letter: S
Question
sale are reduced 21. To calculate a gain or loss on the sale by which of the following? of an asset, the proceeds from the a Tax basis of the property b. Selling expenses C. Amount realized d. A and B above e. All of these Homer and Marge (MFl) sold their home (sales price $850,000, cost $250,000). A paid by the buyer. Homer and Marge owned and lived in their home for 20 22. Thi closing costs were years. How much of the gain is included in gross income? a. $600,000 b. $250,000 c. $100,000 d. $50,000 e. None 23. Jim and Patty Door file a joint tax return and always itemize their deductions. The Door's income for the year is as follows: $120,000 in salary, $3,200 interest income, $750 short-term capital loss. The Door's expenses for the year consist of $2,700 investment interest expense Assuming that the Door's marginal tax rate is 35%, what is the amount of their investment interest expense deduction for the year? a. $2,700 b. $2,450 c. $3,200 d. $500 e. None of theseExplanation / Answer
21.)
The profit or loss on sale of an asset is calculated as follows
Profit/Loss = Sale Proceeds - Selling Expenses - Cost of Acquisition
Cost of Acquisition is also the Tax Basis
Hence the Answer is c.) Both A and B
22.)
As the home (personal home) is held for 20 years (more than 12 months), the resulting gain/loss is Long Term.
The long term capital gain = Sale Proceeds - Cost of Acquisition(Basis) = $850,000 - $250,000 = $600,000
The answer is a.)600,000
23.)
The Investment Interest Expense Deduction is Limited upto the Investment Income Received and taxable.
Hence the entire $2,700 is tax deductible.
The answer is a.)$2,700
Good luck
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