During 2017, Ted and Judy, a married couple, decided to sell their residence. Th

Question

During 2017, Ted and Judy, a married couple, decided to sell their residence. They had owned and occupied the residence for 16 years. The home had a basis of $225, 000. They sold the house in May 2017 for $795,000 Brkers, commissions and other selling expenses totaled $45,000. Since they are both age 68, they intend to rent a smaller apartment and invest the proceeds rather than buy a new house. They want to utilize the $121 provisions. What is the recognized gain? a $750,000 b $525,000. c $25, 000 d $0 e Some other amount

Explanation / Answer

Answer :- Option c). $ 25,000.

Explanation :- Recognized gain = (795000 - 45000) - 225000 - 500000NOTE

= 750000 - 225000 - 500000

= $ 25,000. (Option c).

NOTE :- Ted and Judy (married couple) will claim exclusion up to $ 500,000 of the gain from sale of residential property because the property has beeen treated as a principal residence for more than two years out of the last five years just before sale of property. (Section 121 of Internal revenue service code).

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