Calculate gain recognized (tax class) The folowng nfomatid displayed below] Sara

Question

Calculate gain recognized (tax class)

The folowng nfomatid displayed below] Sarah (single) purchased a home on January 1, 2008, for $600,000. She eventually sold the home for $800,000. What amount of the $200,000 gain on the sale does Sarah recognize in each of the following alternative situations? (Assume accumulated depreciation on the home is zero.) (Do not round intermediate calculations. Round your answers to the nearest whole dollar amount. Leave no answer blank. Enter zero if applicable.) d. Sarah used the home as a vacation home from January 1, 2008, through December 31, 2011. She used the home as her principal residence from January 1, 2012, until she sold it on January 1, 2017 Gain recognized

Explanation / Answer

To qualify for the scetion 121, exclusion, Sarah must meet both the ownership test and use test. Sarah if eligible for exclusion if she owned and used the home as a principal home for 2 years out of the 5 years immediatley preceding the sate of sale.

Since she owned amd used the home as a principal residence during the last 5 years, she is eligible for exclusion upto $ 250,000.

Since the gain is $200,000, gain recognised will be Nil.

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