Hannah,a single taxpayer,sold her primary residence on January 1,2016.Her total realized gain is $210,000.The house was acquired on January 1,2006 and rented to tenants until December 31,2012.Hannah moved in on January 1,2013 and used the house as her principal residence until the sale.During the rental period,$30,000 of depreciation was deducted.Due to the sale of the house in 2016,Hannah will recognize a gain of

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Hannah will have to pay tax on the lesser of the total realized gain ($210,000) or the amount of gain attributable to the period in which the house was not her primary residence. The house was not her primary residence for 6 years (2006-2012) out of the total 11 years of ownership, which is equivalent to 54.55% of the ownership period. Therefore, the portion of the realized gain that is subject to tax is $210,000 x 54.55% = $114,545. Additionally, the depreciation claimed during the rental period must be recaptured and subject to tax. Since the total depreciation claimed was $30,000, the amount of gain subject to tax is $114,545 + $30,000 = $144,545. Therefore, Hannah will recognize a gain of $210,000 - $144,545 = $65,455. However, since she held the property for over 1 year, this gain will be taxed at the long-term capital gains rate. The maximum long-term capital gains tax rate for a single taxpayer in 2016 was 20%. Therefore, Hannah's tax liability will be $65,455 x 20% = $13,091. The total gain recognized by Hannah is $102,000 (sale price - adjusted basis), so she will have to pay tax on this amount.

Hannah,a Single Taxpayer,sold Her Primary Residence on January 1,2016