Taylor has owned and occupied her personal residence (adjusted basis of $190,000

Question

Taylor has owned and occupied her personal residence (adjusted basis of $190,000) for four years. In April 2015, she sells the residence for $300,000 (selling expenses are $20,000). On the same day as the sale, Taylor purchases another house for $350,000. Because of noisy neighbors, she sells the new house after just 10 months. The selling price is $483,000 (selling expenses are $18,000).

What is Taylor’s recognized gain on the sale of the first residence?

What is Taylor’s basis for her second residence?

What is Taylor’s recognized gain on the sale of the second residence?

Assume instead that the sale of the second residence was due to Taylor’s job transfer to another state. What is her recognized gain on the sale of the second residence?

Explanation / Answer

Adjusted value of residence = 190000

selling price = 300000

Selling Price = 20000

Taylor recognized gain on the sale of the first residence = 300000-20000- 190000 = 90000

What is the Taylor's basis for her second residence =

Taylor's basis for her second residence is the purchase price of the new residence is 350000

What is Taylor’s recognized gain on the sale of the second residence?

Taylor’s realized gain is $483,000 (selling price) - $350,000(adjusted basis) - $18,000(selling expenses) = $115,000.
Because Taylor doesn't qualify for section 121 exclusion mentioned above - the full amount of $115,000 would be her recognized gain

4- Assume instead that the sale of the second residence was due to Taylor’s job transfer to another state. What is her recognized gain on the sale of the second residence?

In this case her maximum exclusion would be $250,000 * 10 month / 24 months = $104,000 - that amount may be excluded.and her recognized gain would be $115,000 - $104,000 = $11,000.

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