Mitchell and Debbie Dixon,a married couple,sell their personal residence to Sophie.Sophie pays $225,000 and assumes their $70,000 mortgage.To make the sale,the Dixons pay $4,000 in commissions and $1,000 in legal costs.The couple has 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?

Question

Quizplus · Accepted Answer

The Dixons 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 follows: Sale price ($225,000 + $70,000) - Selling expenses ($4,000 + $1,000) - Basis ($125,000) = $165,000. Since this is less than the $500,000 exclusion, the recognized gain is $0.

Mitchell and Debbie Dixon,a Married Couple,sell Their Personal Residence to Sophie.Sophie