Charlotte purchases a residence for $105,000 on April 13,2007.On July 1,2015,she marries Howard and they use Charlotte's house as their principal residence.On May 12,2017,they sell their home for $390,000,incurring $20,000 of selling expenses and purchase another residence costing $350,000.What is their realized and recognized gain?

Realized Recognized

Question

Charlotte purchases a residence for $105,000 on April 13,2007.On July 1,2015,she marries Howard and they use Charlotte's house as their principal residence.On May 12,2017,they sell their home for $390,000,incurring $20,000 of selling expenses and purchase another residence costing $350,000.What is their realized and recognized gain?
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Realized Recognized

Quizplus · Accepted Answer

The realized gain is the difference between the selling price and the cost basis. The cost basis is the original purchase price of $105,000. The selling price is $390,000. Therefore, the realized gain is $285,000.The recognized gain is the realized gain minus any selling expenses. The selling expenses are $20,000. Therefore, the recognized gain is $265,000.

Charlotte Purchases a Residence for $105,000 on April 13,2007