Virginia, who is single, sells her principal residence (adjusted basis of $150,000) on January 5, 2012, for $380,000.She has owned and occupied it as her principal residence for 20 years.She incurs a realtor's commission of $22,000 and legal fees of $5,000.On January 3, 2012, Virginia purchases a townhouse for $300,000 and uses it as her principal residence.Because it was not near a convenience store, she sells the townhouse on December 20, 2012, for $330,000.She incurs a realtor's commission of $18,000 and legal fees of $4,000.She buys a house on December 1, 2012, for $250,000 and uses it as her principal residence.What is Virginia's recognized gain on the sale of each house and her adjusted basis for the house purchased on December 1, 2012?
A)$0; $0; and $250,000.
B)$0; $8,000; and $250,000.
C)$203,000; $0; and $250,000.
D)$0; $8,000; and $47,000.
E)None of the above.

Question

Quizplus · Accepted Answer

Virginia can exclude the gain from the sale of her principal residence under the Section 121 exclusion, resulting in a $0 recognized gain on the first sale. For the townhouse, the recognized gain is calculated as the selling price ($330,000) minus the selling expenses ($18,000 + $4,000) and the adjusted basis ($300,000), resulting in an $8,000 gain. The adjusted basis for the new house is the purchase price of $250,000.

Virginia, Who Is Single, Sells Her Principal Residence (Adjusted Basis