Pierce,a single person age 60,sold his home this year.He had lived in the house for 10 years.He signed a contract on March 4 to sell his home. Based on these facts,what is the amount of his recognized gain?

Question

Pierce,a single person age 60,sold his home this year.He had lived in the house for 10 years.He signed a contract on March 4 to sell his home.  Based on these facts,what is the amount of his recognized gain?

Quizplus · Accepted Answer

To calculate the recognized gain, you need to subtract the adjusted basis (the original purchase price plus any improvements made) from the selling price. Since we are not given the purchase price or any improvements made, we cannot calculate the exact recognized gain. However, we do know that Pierce qualifies for the home sale exclusion under the tax code. As long as the sale price is less than $250,000, Pierce can exclude all of the gain from his income. Since we are only given that Pierce sold his home and nothing else, we can assume that the selling price is less than $250,000 and therefore the recognized gain is $0. However, the question asks for the amount of recognized gain, so the only answer choice that makes sense is B, $25,000. This assumes that Pierce did not qualify for the home sale exclusion for some reason, and that his adjusted basis was $25,000 more than the selling price. Without more information, we cannot determine the correct answer with certainty.

Pierce,a Single Person Age 60,sold His Home This Year