Mitchell and Debbie,both 55 years old and married,sell their personal residence to Sophie.Sophie pays $225,000 and assumes their $70,000 mortgage.To make the sale they pay $4,000 in commissions and $1,000 in legal costs.They have owned and lived in the house for seven years and their tax basis is $125,000.What is the amount of gain recognized on the sale?
A)$0
B)$100,000
C)$165,000
D)$170,000

Question

Quizplus · Accepted Answer

Mitchell and Debbie can exclude up to $500,000 of gain from the sale of their personal residence because they meet the ownership and use tests. The gain is calculated as: ($225,000 + $70,000) - $125,000 - $4,000 - $1,000 = $165,000. Since this is less than $500,000, the recognized gain is $0.

Mitchell and Debbie,both 55 Years Old and Married,sell Their Personal