Sue, a single taxpayer, purchased a principal residence in 2009 for $415,000. In 2012, she paid $18,000 to add a sunroom. This year, Sue sold the residence for $686,000. Her selling expenses were $5,000. How much gain must Sue recognize on the sale?

Question

Quizplus · Accepted Answer

Sue can exclude up to $250,000 of gain from the sale of her principal residence. Her adjusted basis is $433,000 ($415,000 + $18,000). Her gain is $248,000 ($686,000 - $5,000 - $433,000), which is less than the exclusion limit, so she recognizes $0 gain.

Sue, a Single Taxpayer, Purchased a Principal Residence in 2009