Yolanda buys a house in the mountains for $450,000 that she uses as her personal vacation home.She builds an additional room on the house for $40,000.She sells the property for $560,000 and pays $28,000 in commissions and $4,000 in legal fees in connection with the sale.What is the recognized gain or loss on the sale of the house?
A)$0
B)$38,000
C)$70,000
D)$110,000

Question

Quizplus · Accepted Answer

The recognized gain is calculated as the difference between the selling price and the cost basis, which includes the purchase price and the cost of the additional room, minus the selling expenses. The cost basis is $450,000 + $40,000 = $490,000. The selling expenses are $28,000 + $4,000 = $32,000. The selling price is $560,000. Therefore, the recognized gain is $560,000 - $490,000 - $32,000 = $38,000.

Yolanda Buys a House in the Mountains for $450,000 That