Final answer:
To calculate Nathaly's taxable income from the sale of her home, subtract her adjusted basis ($400,000) from her sales price ($850,000) to get the capital gain of $450,000. If she qualifies for the IRS exclusion of $250,000 for single persons, her taxable income would be reduced to $200,000.
Step-by-step explanation:
The question involves calculating the taxable income from the sale of a home. To determine the taxable income, we use Nathaly's adjusted basis and sales price for her home. Nathaly's adjusted basis in the home is $400,000, and she sold it for $850,000. To find the taxable income, also known as the capital gain, we subtract the adjusted basis from the sales price. Therefore, the calculation is:
- Sales Price: $850,000
- Less Adjusted Basis: $400,000
- Capital Gain (Taxable Income): $450,000
However, the IRS allows individuals to exclude up to $250,000 in capital gains from the sale of a primary residence if certain conditions are met, which could potentially reduce Nathaly's taxable income. Assuming she qualifies for the exclusion, the taxable income would then be:
- Capital Gain: $450,000
- Less Exclusion: $250,000
- Reduced Taxable Income: $200,000
But note that the specific tax situation can vary, and it is always best to consult with a tax professional or reference IRS guidelines directly for the most accurate information.