Final answer:
The couple's gross capital gain is $150,000, but they likely qualify for the IRS Section 121 exclusion that allows them to exclude up to $500,000 of gains since they are married and filing jointly. Therefore, their sale likely has no taxable capital gain.
Step-by-step explanation:
The married couple's taxable capital gain on the sale of their home would be the difference between the sale price and the purchase price, assuming no adjustments for things like improvements or selling costs. They bought the home for $400,000 and sold it for $550,000, so the gross capital gain is $550,000 - $400,000 = $150,000.
However, it's important to note that for tax purposes, individuals may exclude up to $250,000 of capital gains on the sale of a home if it has been their primary residence for at least two of the five years before the sale (IRS Section 121 exclusion). For married couples filing jointly, this exclusion is up to $500,000. As such, assuming the couple meets the criteria for the exclusion, they would not have any taxable capital gain as the gain is less than the $500,000 exclusion limit.