Final answer:
The Sims are required to include the amount of gain on the sale of the home in their taxable income.
Step-by-step explanation:
The Sims are required to include the amount of gain on the sale of the home in their taxable income. Gain on the sale of a home refers to the difference between the selling price of the home and its adjusted basis.
To calculate the gain, the Sims need to subtract the adjusted basis of the home from the selling price. If the selling price is higher than the adjusted basis, the difference is considered as gain and should be included in taxable income.
For example, if the Sims purchased a home for $300,000 and sold it for $400,000, the gain on the sale would be $100,000. This $100,000 gain would need to be included in their taxable income.