Final answer:
Ethan can exclude the entire $210,000 gain from his 2015 gross income because he qualifies for the home sale gain exclusion, having lived in the house for at least two out of the five years before the sale, and no allocation for nonqualified use is needed.
Step-by-step explanation:
The question relates to the exclusion of gain from the sale of a personal residence under the United States Internal Revenue Code. Given the details, Ethan lived in the home for at least two out of the five years prior to selling it, which allows him to qualify for the home sale gain exclusion.
Since Ethan is single, he can exclude up to $250,000 of gain from his gross income.
However, because he rented out the property for a period, not all of the gain may qualify for exclusion. The portion of the gain that is attributable to the period of nonqualified use (time the property was rented out) will not be eligible for exclusion.
Given the time frames provided, the nonqualified use is not applicable in the 5-year period preceding the sale because the last use of the property was as Ethan's primary residence. Therefore, we do not need to allocate the gain to nonqualified use.
The correct answer is D. $210,000, as this is the amount of gain Ethan realized from the sale, and it is less than the $250,000 exclusion limit for a single filer who meets the ownership and use tests.