On November 1, year 1, Jamie (who is single)purchased and moved into her principal residence. In the early part of year 2, Jamie was laid off from her job. On February 1, year 2, Jamie sold the home at a $57,500 gain. She sold the home because she found a new job in a different state. How much of the gain, if any, may Jamie exclude from her gross income in year 2?
A)$0.
B)$5,750.
C)$31,250.
D)$57,500.

Question

Quizplus · Accepted Answer

To qualify for the exclusion of gain on the sale of a principal residence, the taxpayer must have owned and used the home as their principal residence for at least two of the five years prior to the sale. In this situation, Jamie met the ownership and use test as she owned and lived in the home for over a year before selling it.

Additionally, the maximum amount of gain that can be excluded on the sale of a principal residence is $250,000 for a single taxpayer. In this case, Jamie had a gain of $57,500, which is below the exclusion limit of $250,000. Therefore, she may exclude the entire amount of gain from her gross income in year 2.

The correct answer is C, $31,250, which is $57,500 gain multiplied by the ownership and use percentage of 544/730 days.

On November 1, Year 1, Jamie (Who Is Single)purchased and Moved