Troy (single) purchased a home in Hopkinton, MA, on January 1, 2007, for $220,00

Question

Troy (single) purchased a home in Hopkinton, MA, on January 1, 2007, for $220,000. He sold the home on January 1, 2016, for $240,700. How much gain must Troy recognize on his home sale in each of the following alternative situations? (Do not round intermediate calculations. Round your answers to the nearest whole dollar amount. Leave no answer blank. Enter zero if applicable.)

a. Troy rented the home out from January 1, 2007, through November 30, 2008. He lived in the home as his principal residence from December 1, 2008, through the date of sale. Assume accumulated depreciation on the home at the time of sale was $9,500.

Recognized gain:_________

b. Troy lived in the home as his principal residence from January 1, 2007, through December 31, 2011. He rented the home from January 1, 2012, through the date of the sale. Assume accumulated depreciation on the home at the time of sale was $6,250.

Recognized gain:___________

c. Troy lived in the home as his principal residence from January 1, 2007, through December 31, 2013. He rented out the home from January 1, 2014, through the date of the sale. Assume accumulated depreciation on the home at the time of sale was $0.

Recognized gain:____________

Explanation / Answer

Solution:-

a.

Total capital gain = 240,700 - 220,000 = 20,700

1 jan 2007 to Nov 30 2008 = 1 year 11 month = 1.91666667

1.91666667 of 8 * 20,700 = 4,959.3750

20,700 - 4,959.3750 = 15,740.625

Less depreciation = 15,740.625 - 9,500 = 6,241.

b.

5/8 * 20,700 = 12,937.50

12937.50 - 6,250 = 6,688.

c.

7/8 * 20,700 = 18,112.50

18,112.50 - 0 = 18,113

Please Rate or comment if you have any doubt regarding this solution.

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