Question

Matt sold his house for $2,200,000 and had $195,000 in closing costs. His beginning basis was $1,955,000 and he spent $5,000 on capital improvements. What is Matt's capital gain for tax purposes? (assume he doesn't qualify for an exclusion)

Answer 1

$45,000

Step-by-step explanation:

Matt sold the house for $2,200,000 and sales closing cost of $195,000.

The amount realized from the sale will be,

= $2,200,000.00 - $195,000.00

=$ 2, 005, 000.00

He had bought the house for $1,955,000.00 and spent $5000 on improvements.

Total amount ( new adjusted basis)

= $1, 955,000.00 + $5,000 .00

= $1, 960,000.00

The capital gain for tax purposes will be, selling price - buying cost

=$ 2, 005, 000.00 - $1, 960,000.00

=$45,000.00

Assuming no exclusion, capital gain for taxation purposes will be $45,000.00