Nancy purchased her houseboat six years ago for $35,000. She has lived in the houseboat since she purchased it. A friend has offered $62,000 for the houseboat. If she sells it, she will be able to exclude the gain.

Question

Quizplus · Accepted Answer

Nancy meets the requirements for excluding the gain on the sale of a principal residence, which includes owning and using the property for at least 2 out of the last 5 years. As long as she meets these requirements and the profit from the sale is less than $250,000 (or $500,000 if filing jointly with a spouse), she can exclude the gain from her taxable income. In this case, the gain is $27,000 ($62,000 - $35,000), which is well within the exclusion limit.

Nancy Purchased Her Houseboat Six Years Ago for $35,000