Question

Baker, an unmarried individual, sold a personal residence, which has an adjusted basis of $70,000, for $165,000. baker owned and lived in the residence for seven years. selling expenses were $10,000. four weeks prior to the sale, baker paid a handyman $1,000 to paint and fix up the residence. what is the amount of baker's recognized gain?

Answer 1

The answer is $0.

$0 is the bakers recognized gain because a taxpayer is allowed to the exclusion of up to $250,000 and $500,000 for tax payers who are married, of capital gain attributed to the sale of a personal residence. One requirement a baker met here for exclusion that tax payer must occupy the residence for two to five years before sale.