During 2016,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

To calculate the recognized gain, we need to first calculate the amount realized, which is the sale price minus selling expenses:

Amount realized = $880,000 - $53,000 = $827,000

Next, we need to calculate the adjusted basis, which is the original basis plus any improvements made:

Adjusted basis = $300,000 + $6,000 = $306,000

The recognized gain is then the amount realized minus the adjusted basis:

Recognized gain = $827,000 - $306,000 = $521,000

However, since Ted and Judy are both over 65 years old and have owned and occupied the residence for at least 2 out of the past 5 years, they can exclude up to $500,000 of the gain on the sale of the residence. Since their recognized gain is only $521,000, they can exclude the entire amount and the recognized gain is $0.

During 2016,Ted and Judy,a Married Couple,decided to Sell Their Residence,which