During 2010,Ted and Judy,a married couple,decided to sell their residence,which had a basis of $225,000.They had owned and occupied the residence for 16 years.To make it more attractive to prospective buyers,they had the outside painted in April at a cost of $10,000 and paid for the work immediately.They sold the house in May for $795,000.Broker's commissions and other selling expenses amounted to $45,000.Since they both are age 68,they decide to rent an apartment.They purchase an annuity with the net proceeds from the sale.What is the realized gain?
A)$750,000.
B)$525,000.
C)$515,000.
D)$0.
E)None of the above.

Question

Quizplus · Accepted Answer

The realized gain is calculated as the selling price minus the adjusted basis and selling expenses. The adjusted basis is the original basis plus any improvements (painting is not considered an improvement for basis purposes). Therefore, the realized gain is $795,000 (selling price) - $225,000 (basis) - $45,000 (selling expenses) = $525,000.

During 2010,Ted and Judy,a Married Couple,decided to Sell Their Residence,which