Simonne, a single taxpayer, bought her home in La Jolla 25 years ago for $55,000. She has lived continuously in the home since she purchased it. In December, 2014, she sells her home for $395,000. What is Simonne's taxable gain on the sale?

Question

Quizplus · Accepted Answer

To calculate taxable gain, we need to take the selling price of the house and subtract the cost basis (which is the purchase price plus any improvements made over the years) and any selling expenses (such as real estate commissions). In this case, Simonne's cost basis would be the $55,000 purchase price plus any improvements made over the years. Since we are not given any information about improvements, we assume there were none. Therefore, her cost basis is $55,000. Selling expenses are also not given, but we assume they are $0 for simplicity. Therefore, Simonne's taxable gain on the sale is $395,000 - $55,000 = $340,000. However, there is a single taxpayer exclusion of $250,000, so Simonne's taxable gain is reduced to $90,000.

Simonne, a Single Taxpayer, Bought Her Home in La Jolla