Question

Required information [The following information applies to the questions displayed below.] Salvador and Jenna Porter purchased a home in Kenosha, Wisconsin, for $400,000. They moved into the home on February 1 of year 1 . They lived in the home as their primary residence until November 1 of year 1 , when they sold the home for $500,000. The Porters' marginal ordinary tax rate is 35 percent. Note: Leave no answer blank. Enter zero if applicable. 1. Assume that the Porters sold their home and moved because they didn't like their neighbors. How much gain will the Porter cognize on their home sale? home for $500,000. The Porters' marginal ordinary tax rate is 35 percent. Note: Leave no answer blank. Enter zero if applicable. a-1. Assume that the Porters sold their home and moved because they didn't like their neighbors. How much gain will the Porters recognize on their home sale? a-2. At what rate, if any, will the gain be taxed? Required information [The following information applies to the questions displayed below.] Salvador and Jenna Porter purchased a home in Kenosha, Wisconsin, for $400,000. They moved into the home on February 1 of year 1 . They lived in the home as their primary residence until November 1 of year 1 , when they sold the home for $500,000. The Porters' marginal ordinary tax rate is 35 percent. Note: Leave no answer blank. Enter zero if applicable. Assume the Porters sell the home because Jenna's employer transfers her to an office in Texas. How much gain will the Porters ecognize on their home sale? Required information [The following information applies to the questions displayed below.] Salvador and Jenna Porter purchased a home in Kenosha, Wisconsin, for $400,000. They moved into the home on February 1 of year 1 . They lived in the home as their primary residence until November 1 of year 1 , when they sold the home for $500,000. The Porters' marginal ordinary tax rate is 35 percent. Note: Leave no answer blank. Enter zero if applicable. . Assume the same facts as in part (b), except that the Porters sell their home for $700,000. How much gain will the Porters recognize in the home sale? Note: Do not round intermediate calculations.

Answer 1

The capital gain recognized by the Porters on the sale of their house is $100,000 when the house sells for $500,000. If they sell the house for $700,000, the recognized gain is $300,000. The gain is likely taxed at their ordinary income tax rate of 35% since they did not live in the house for more than a year.

Step-by-step explanation:

The capital gain on a home sale is the difference between the selling price and the purchase price of the home. In the case of Salvador and Jenna Porter, the answers to the questions regarding the gain recognized on the sale of their home depend on their circumstance and the selling price.

1. For part a-1, the Porters will recognize a gain of $100,000, calculated as the selling price ($500,000) minus the purchase price ($400,000), because they did not meet the ownership and use tests to exclude gains on the home sale since they lived there for less than 2 years.
2. For part a-2, the recognized gain is generally subject to capital gains tax, but considering they lived in the house for less than a year, the gain is likely to be taxed at their ordinary income tax rate of 35%.
3. In the case where Jenna's employer transfers her to an office in Texas, they will still recognize a gain of $100,000.
4. Assuming the same conditions as part b, but the home sells for $700,000, the Porters recognize a gain of $300,000, which is the difference between the selling price and purchase price.