During 2014,Zeke and Alice,a married couple,decided to sell their residence,which had a basis of $200,000.They had owned and occupied the residence for 20 years.To make it more attractive to prospective buyers,they had the inside painted in April at a cost of $5,000 and paid for the work immediately.They sold the house in May for $800,000.Broker's commissions and other selling expenses amounted to $50,000.They purchased a new residence in July for $400,000.What is the recognized gain and the adjusted basis of the new residence?

Question

Quizplus · Accepted Answer

Amount realized ($800,000 - $50,000)$750,000
Adjusted basis (200,000)
Realized gain $550,000
§ 121 exclusion (500,000)
Recognized gain $ 50,000
The cost of repairs cannot be deducted and does not affect the adjusted basis of the new residence.Therefore,the adjusted basis of the new residence is its cost of $400,000.

During 2014,Zeke and Alice,a Married Couple,decided to Sell Their Residence,which