Kay,a single taxpayer,bought her home in Montecito 30 years ago for $45,000.She has lived continuously in the home since she purchased it.In December,2011,she sells her home for $550,000.What is Kay's taxable gain on the sale?

Question

Quizplus · Accepted Answer

To calculate the taxable gain on the sale of a home, you must subtract the basis (which is the original purchase price plus any improvements made) from the selling price. In this case, Kay's basis would be the original purchase price of $45,000. Therefore, her taxable gain is $550,000 - $45,000 = $505,000. However, there is a capital gains exclusion for the sale of a primary residence, which allows single taxpayers to exclude up to $250,000 of the gain from their taxable income. Since Kay has owned and lived in the home for more than 2 out of the past 5 years, she is eligible for this exclusion. Therefore, her taxable gain would be reduced to $505,000 - $250,000 = $255,000.

Kay,a Single Taxpayer,bought Her Home in Montecito 30 Years Ago