Question

Problem 13-90 (LO. 8) Pedro, age 57, is the sole owner of his principal residence, which he has owned and occupied for 10 years. Maria, his spouse, has also lived there 10 years. He sells the house for a realized gain of $340,000. If an amount is zero, enter "o". a. Can Pedro use the $ 121 exclusion if he and Maria file a joint return? Their If Pedro can use the $ 121 exclusion, the maximum eligible amount of 121 exclusion (before any limitations) is $ realized gain is s and the recognized gain is $ b. Can Pedro use the $ 121 exclusion if he files a separate return? What is the maximum eligible amount of the exclusion? The recognized gain is s C. Assume instead that the realized gain is $550,000 and a joint return is filed. The recognized gain is s

Answer 1

Pedro, age 57, is the sole owner of his principal residence, which he has owned and occupied for 10 years. Maria, his spouse, has also lived there 10 years. He sells the house for a realized gain of $340,000
a) Can Pedro use the § 121 exclusion if he and Maria file a joint return?	Yes
If so, what are the available amount of the exclusion and the recognized gain
§ 121 exclusion	$    500,000.00
Realized gain	$    340,000.00
Recognized Gain	$0
If there is a  capital gain from the sale of  principal residence , he or she  may qualify to exclude up to $250,000 of that gain from his or her income, or up to $500,000 of that gain if he or she  file a joint return with his or her spouse.
b)
Can Pedro use the § 121 exclusion if the files a separate return? If so, what are the available amountof the exclusion and the recognized gain?
Yes
§ 121 exclusion	$    250,000.00
Realized gain	$    340,000.00
Recognized Gain ($340,000 - $250,000)	$      90,000.00
c)
Realized Gain	$    550,000.00
§ 121 exclusion	$    500,000.00
Recognized Gain ($550,000 - $500,000)	$      50,000.00
d)
Realized Gain	$    550,000.00
§ 121 exclusion	$    250,000.00
Recognized Gain ($550,000 - $250,000)	$    300,000.00
e)
Recognized Gain ($340,000 - $250,000)	$      90,000.00
Maria and Pedro have been married for only 18 months, they did not meet 2 years test to file joint return but Pedro is qualified $250,000 section 121  exclusion .