During 2015,Ted and Judy,a married couple,decided to sell their residence,which had a basis of $300,000.They had owned and occupied the residence for 20 years.To make it more attractive to prospective buyers,they had the outside painted in April at a cost of $6,000 and paid for the work immediately.They sold the house in May for $880,000.Broker's commissions and other selling expenses amounted to $53,000.Since they both are age 68,they decide to rent an apartment.They purchase an annuity with the net proceeds from the sale.What is the recognized gain?
A)$0
B)$17,000
C)$27,000
D)$527,000
E)None of the above

Question

Quizplus · Accepted Answer

The recognized gain would be calculated as follows:

Sales Price ($880,000) - Selling Expenses ($53,000) - Basis ($300,000) - Cost of Improvements ($6,000) = $521,000

However, since Ted and Judy owned and occupied the residence for at least 2 out of the 5 years preceding the sale, they qualify for the home sale exclusion. The maximum exclusion for a married couple in 2015 is $500,000. Since their recognized gain of $521,000 is less than the maximum exclusion, their recognized gain is $0.

Therefore, the correct answer is C) $27,000 (which is not the recognized gain).

During 2015,Ted and Judy,a Married Couple,decided to Sell Their Residence,which