Final answer:
Emily's gain on the investment land is calculated by subtracting her basis of $260,000 from the fair market value of $300,000, resulting in a gain of $40,000.
Step-by-step explanation:
When Emily sells her land, the capital gain is calculated by subtracting the basis (the original purchase price plus improvements and transaction fees) from the fair market value (FMV) at the time of sale. In this case, Emily's land has a FMV of $300,000 and a basis of $260,000. The gain on the land would be the difference between these two amounts.
To calculate the gain:
- Determine the fair market value: $300,000.
- Determine the basis: $260,000.
- Subtract the basis from the fair market value to find the gain: $300,000 - $260,000 = $40,000.
Therefore, Emily's gain on the land is $40,000, which could potentially be subject to capital gains tax depending on her individual circumstances.