Question

On July 1, 2019, Ted, age 73 and single, sells his personal residence of the last 30 years for $368,000. Ted’s basis in his residence is $48,776. The expenses associated with the sale of his home total $22,080. On December 15, 2019, Ted purchases and occupies a new residence at a cost of $175,000. Calculate Ted’s realized gain, recognized gain, and the adjusted basis of his new residence.

Answer 1

Answer:

Realized gain is $297,144

Recognized gain is $47,144

Adjusted basis for new residence is $175,000

Explanation:

•Ted's Realized gain:

Sales price $368,000 - basis $48,776 - expenses $22,080 = $297,144.

• Ted's Recognized gain:

Realized gain $297,144 - exclusion upto $250,000 = $47,144.

• Ted's basis of the new residence is its cost of $175,000.