Tony and Faith sell their home for $495,000,incurring selling expenses of $25,000.They purchased the residence for $85,000 and made capital improvements totaling $20,000 during the 20 years they lived there.What is their realized gain and recognized gain on the sale?

Realized Recognized

Question

Tony and Faith sell their home for $495,000,incurring selling expenses of $25,000.They purchased the residence for $85,000 and made capital improvements totaling $20,000 during the 20 years they lived there.What is their realized gain and recognized gain on the sale?
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Realized Recognized

Quizplus · Accepted Answer

The realized gain is calculated as the selling price minus the purchase price, capital improvements, and selling expenses: $495,000 - $85,000 - $20,000 - $25,000 = $365,000. The recognized gain is $0 because they likely qualify for the home sale exclusion, which allows them to exclude up to $500,000 of gain if filing jointly.

Tony and Faith Sell Their Home for $495,000,incurring Selling Expenses