Question

During 2018, Ted and Judy, a married couple, decided to sell their residence, which had a basis of $300.000. They had owned and occupied the residence for 20 years. outside painted in April at a cost of $6,000 and paid for the work immediately. They sold the house in May for $880,000. Broker's commissions and other selling expenses amounted to $53,000. Since they both are age 68, they decide to rent an apartment. They purchase an annuity with the net proceeds from the sale. What is the recognized To make it more attractive to prospective buyers, they had the gain?

a. $0
b. $17,000
c. $27,000
d. $527,000
e. None of the above

Answer 1

c. $27,000

Step-by-step explanation:

The computation of the recognized gain is shown below:

Sale price of house $8,80,000

Less: Cost of acquisition of house -$3,00,000

Gain on sale of house $5,80,000

Less: Commission & selling expenses -$53,000

Net gain on sale of house 5,27,000

According to the provision of the IRS, the amount deductible in case of married couple is $500,000

And, the net gain on sale of house is $527,000

So, the difference in amount shows the recognized gain i.e $27,000