Kelly, who is single, sells her principal residence, which she has owned and occupied for eight years, for $375,000.
The adjusted basis is $64,000 and selling expenses are $22,000.She purchases another principal residence three months later for $200,000.Her recognized gain is $39,000 and her basis for the new principal residence is $200,000.

Question

Quizplus · Accepted Answer

The recognized gain is calculated as follows: 
Sale Price - Adjusted Basis - Selling Expenses = Recognized Gain
$375,000 - $64,000 - $22,000 = $289,000 - $250,000 (exclusion for single taxpayers) = $39,000 recognized gain.
Since she purchased another principal residence within two years for at least the same amount as the sale price, she can exclude up to $250,000 of the recognized gain. Therefore, her basis for the new principal residence is the purchase price of $200,000.

Kelly, Who Is Single, Sells Her Principal Residence, Which She