Question

Michael and Mary Mason sold for $520,000.00 in March of 2019 their residence that they had purchased in 2014 for $75,000.00. They had made capital improvements during their 10-year ownership totaling $25,000.00. They moved into a smaller house that cost $220,000.00.

• What is their recognized gain should they elect to use Section 121? _______ _____

• What is their recognized gain should they elect to use Section 121 if they sold the house for $720,000.00?

• Assume instead that the Masons resided in a very depressed neighborhood and the home was sold for only $60,000.00.

   How much, if any, gain or loss is recognized? _____________

Answer 1

solution Given that The purchase Cost = $75,000 - Capital improvements = $25,000 sale price = $520,000 Recogonized Capital gain ? sale price - (purchase Cost tof residence + Capital improvement) - capital enclusions under sec121 [ The yule 121 applies to masons and recognized capital gains will be The masons are married and filing jointly and are allowed manimum $500,000 Capital augain exclusion.

Recogonized capital gain . : - 590,000 -(75000+$ 25000) $500,000 - 520,000 – 100,000 - $500,000 - (480,000) There will be no recognized Capital gain B Following assuptions taken. purchase Cost = 75,000 $ Capital improvement = $25,000 sale price = $720,000 Recognized capital gain = $720,000-(75000+25000) —$ 500,000 2 $790,000 -100,000 - $500,000 =$120,000 1 As per 6 UiS Code & 1212- Capital loss carry backs and carryovers. Lossy from the sale of personal property including a residence, do not quality for Capital losses Hence Masons can not claim losses of their sale price of residence is less than purchase Cost.. Gols The End > CS Scanned with CamScanner