Charlotte purchases a residence for $105,000 on April 13,2003.On July 1,2011,she marries Howard and they use Charlotte's house as their principal residence.If they sell their home for $390,000,incurring $20,000 of selling expenses and purchase another residence costing $350,000.Which of the following statements is/are correct concerning the sale of their personal residence?
I
If they sell the residence on June 1,2013,they must recognize a gain of $15,000 on the sale.
II)If they sell the residence on August 1,2013,they will recognize no gain on the sale.

Question

Quizplus · Accepted Answer

The couple is entitled to a $250,000 exclusion on the gain from the sale of their principal residence because they owned and used the residence as their principal residence for two of the five years preceding the sale. The gain is $390,000 - $105,000 - $20,000 = $265,000. Since the gain is less than the $250,000 exclusion, no gain is recognized.

Charlotte Purchases a Residence for $105,000 on April 13,2003