Question

Olessa, single and age 60, sold her home for $540,000 after living there for 20 years. her selling expenses were $10,000 and her adjusted basis in that home was $220,000. what is the maximum gain that olessa must report in connection with the sale of her principal residence?

Answer 1

Maximum gain that Olessa made from selling of her house is clearly = Selling price - (adjusted basis + selling expenses) = 540,000 - (220,000 + 10,000) = $310,000 She must report a capital gain of $310,000, as it is more than $250,000. However, only the amount above $250,000 will be taxed at capital gain tax rate.