Simonne, a single taxpayer, bought her home in Orlando 25 years ago for $55,000. She has lived continuously in the home since she purchased it. In the current year, she sells her home for $405,000. What is Simonne's taxable gain on the sale?

Question

Quizplus · Accepted Answer

Simonne's taxable gain is calculated by taking the selling price ($405,000) and subtracting the adjusted basis of the house. The adjusted basis is the original purchase price plus any capital improvements minus any depreciation. Since Simonne has lived in the house continuously and has not taken any depreciation on it, her adjusted basis is simply the original purchase price of $55,000.

$405,000 - $55,000 = $350,000

Therefore, Simonne's taxable gain on the sale is $350,000. However, single taxpayers can exclude up to $250,000 in capital gains on the sale of a primary residence if they meet certain ownership and use requirements. Since Simonne has lived in the house for 25 years, she meets these requirements and can exclude up to $250,000 of the gain from her taxable income.

$350,000 - $250,000 = $100,000

So Simonne's taxable gain on the sale is $100,000.

Simonne, a Single Taxpayer, Bought Her Home in Orlando 25