Question

On July 1, 2018, Ted, age 73 and single, sells his personal residence of the last 30 years for $368,000. Ted's basis in his residence is $42,000. The expenses associated with the sale of his home total $22,000. On December 15, 2018, Ted purchases and occupies a new residence at a cost of $175,000. Calculate Ted's realized gain, recognized gain, and the adjusted basis of his new residence.

Answer 1

304,000

54,000

175,000

Step-by-step explanation:

Ted has a realized gain of $304,000 ($368,000 sales price – $22,000 selling expenses –$42,000 basis).

Ted's recognized gain is $54,000 ($304,000 realized gain - $250,000 exclusion).

The basis of the new residence is its cost of $175,000