Question

Serena is single. She purchased her principal residence three years ago. She lived in the home until she sold it at a $300,000 gain this year. Serena was allowed to exclude $250,000 of the $300,000 gain. What is the character of the $50,000 gain she was not able to exclude?

Answer 1

Answer: Long -term capital gain

Explanation:

Serena is single, so based on the Taxpayer Relief Act of 1997, she would pay no capital gains tax on the first $250,000 gain.

Therefore, $300,000 - $250,000 = $50,000

The remaining $50,000 gain is taxable because of her being single and it has been her principal residence for three years.