Question

On August 31, 2018, Harvey and Ling, who file a joint return and live in Charleston, South Carolina, sell their personal residence, which they have owned and lived in for 10 years. The realized gain of $352,600 was excluded under § 121. They purchased another personal residence in Charleston for $564,160 on September 1, 2018. However, in 2019, Harvey's employer transfers him to Houston, Texas. The couple sells the Charleston home on February 28, 2019, and purchases a new home in Houston. The realized gain on the second sale is $317,340. What is Harvey and Margaret's recognized gain on the second sale ?

Answer 1

$192,340

Step-by-step explanation:

Since Harvey and Ling bought their second home on September 1, 2018 and sold it 6 months later, in February 28, 2019, they can claim a partial § 121 exclusion on the gains resulting from the selling of the second home.

Total gains from the sale of the second home = $317,340 - $125,000 (§ 121 exclusion = $500,000 x 6/24 months ) = $192,340