Answer:
The first $250,000 of the gain can be excluded and the remaining $5,000 gain will be treated as a long-term capital gain
Explanation:
Gain on the house = $320,000 - $65,000 = $255,000
When an individual has a capital gain from the sale of his/her main home, that person may qualify to exclude up to $250,000 of that gain from his/her income, if he/she is single. But if for spouses, they can exclude up to $500,000 of that gain if they a joint return.
However, in order to qualify for the $250,000/$500,000 home sale exclusion, the person(s) involved must own and occupy the home as their principal residence for at least two years before they decide to sell it.
From the explanation above, we can conclude that; since Daniel is a single taxpayer, and he owns a house which he has used as his principal residence for several years, then he is qualified to exclude the first $250,000 from the gain of $255,000, and the remaining $5,000 will be treated as a long-term capital gain.
