Final answer:
Constanza's realized gain on the sale of her residence is $458,160, calculated by subtracting the adjusted basis and selling expenses from the selling price. Her recognized gain is $208,160 after applying the IRS exclusion for the sale of a primary residence.
Step-by-step explanation:
To calculate Constanza's realized gain on the sale of her residence, we subtract the adjusted basis of the house and the selling expenses from the selling price. Constanza's adjusted basis is $276,000, and her selling expenses are $38,640. The selling price of the house is $772,800.
Realized Gain = Selling Price - Adjusted Basis - Selling Expenses
Realized Gain = $772,800 - $276,000 - $38,640
Realized Gain = $458,160
To determine the recognized gain, we need to consider the tax implications. Since Constanza has lived in the house for 30 years and the gain on her residence, the IRS allows an exclusion of up to $250,000 on the gain of the sale of a primary residence for single filers, which Constanza qualifies for. Thus, her recognized gain would be the realized gain minus the exclusion amount.
Recognized Gain = Realized Gain - Exclusion Amount
Recognized Gain = $458,160 - $250,000
Recognized Gain = $208,160
In summary, Constanza's realized gain is $458,160, and her recognized gain would be $208,160, after considering the IRS exclusion for the sale of a primary residence.