Clem and Chloe, a married couple, sell their principal residence that they have owned and occupied for the past twenty years.The adjusted basis for the residence is $324,000.They incurred selling expenses of $30,000.How much gain must they recognize if they sell the residence for $904,000?

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The gain on the sale is calculated by subtracting the adjusted basis and selling expenses from the sale price: $904,000 - $324,000 - $30,000 = $550,000. However, under U.S. tax law, married couples filing jointly can exclude up to $500,000 of gain on the sale of their principal residence if they meet certain conditions, which they do in this case. Therefore, they must recognize $50,000 of gain ($550,000 - $500,000 exclusion).

Clem and Chloe, a Married Couple, Sell Their Principal Residence