Ralph purchased a home in 2012 for $600,000. Ralph added a pool and landscaping for $36,000. Ralph lost his job and had to sell the home In a short sale for $420,000. Ralph had depreciated $32,000. The real estate commission was $28,000. What is the capital gains computation for Ralph?

Question

Quizplus · Accepted Answer

Ralph's adjusted basis in the home is the original purchase price plus improvements, $600,000 + $36,000 = $636,000. The selling price is $420,000 minus the real estate commission of $28,000, resulting in a net selling price of $392,000. The capital loss is the adjusted basis minus the net selling price, $636,000 - $392,000 = $244,000. Depreciation reduces the basis, but since it's a personal residence, depreciation typically doesn't apply. Therefore, the correct calculation ignores depreciation, resulting in a loss of $244,000, not an option provided. However, based on the provided options, the closest to the correct calculation is a loss of $212,000, indicating a possible error in the question or answer choices.

Ralph Purchased a Home in 2012 for $600,000