Question

Janice bought her house in 2009 for $395,000. Since then, she has deducted $70,000 in depreciation associated with her home office and has spent $45,000 replacing all the old pipes and plumbing. She sells the house on July 1, 2018. Her realtor charged $34,700 in commissions. Prior to listing the house with the realtor, she spent $300 advertising in the local newspaper. Don buys the house for $500,000 in cash and assumes her mortgage of $194,000. What is Janice's adjusted basis at the date of the sale and the amount realized?

a. $370,000 adjusted basis; $661,400 amount realized.
b. $370,000 adjusted basis; $659,000 amount realized.
c. $370,000 adjusted basis; $665,200 amount realized.
d. $325,000 adjusted basis; $663,200 amount realized.
e. $325,000 adjusted basis; $694,000 amount realized.

Answer 1

Janice's adjusted basis at the date of the sale is $370,000 and the amount realized is $659,000.

Step-by-step explanation:

To calculate Janice's adjusted basis at the date of the sale and the amount realized, we need to take into account the initial purchase price, depreciation, and additional expenses. The adjusted basis is calculated by subtracting the total depreciation and expenses from the original purchase price. In this case, the adjusted basis is $395,000 - $70,000 - $45,000 = $280,000.

The amount realized is calculated by subtracting the commissions and advertising expenses from the sales price. In this case, the amount realized is $500,000 - $34,700 - $300 = $465,000.

Therefore, the correct answer is option b: $370,000 adjusted basis; $659,000 amount realized.