Question

Cameron (single) purchased and moved into his principal residence on July 1, 2014. On June 1, 2015, Cameron lost his job. Because he couldn't afford the payments on his new home, he sold it on July 1, 2015 in order to move into some apartments across the street. On the sale of his principal residence, Cameron realized a $50,000 gain. How much of the gain is Cameron allowed to exclude from his 2015 gross income?

A. $0
B. $2,500
C. $25,000
D. $50,000

Answer 1

Cameron is allowed to exclude $25,000 of the gain from his 2015 gross income due to the tax laws regarding the sale of a principal residence.

Step-by-step explanation:

Cameron is allowed to exclude $25000 of the gain from his 2015 gross income.

According to the tax laws, if an individual sells their principal residence, they are allowed to exclude up to $250,000 of the gain from their gross income ($500,000 for married couples filing jointly) if certain conditions are met. One of the conditions is that the homeowner must have owned and used the property as their main home for at least two out of the five years before the sale. Another condition is that the homeowner must not have excluded the gain from the sale of another home in the two years before the current sale.

In Cameron's case, he purchased and moved into his principal residence on July 1, 2014, and sold it on July 1, 2015. This means that he owned and used the property as his main home for less than two years, so he does not meet the condition to exclude the gain from his gross income. Therefore, the correct answer is C. $25,000.