Question

Abigail and Darcy are married. In 2017 they sold there home, which they had purchased in 2012, and lived in it since 2013. They sold the house for $865,000. They purchased the house for $270,000 and made improvements costing $45,000. Abigail and Darcy immediately purchased another home for $800,000. What is their recognized gain in 2017 from the sale of the home assuming this is the only home they ever sold?

Answer 1

Answer:

$485,000

Explanation:

Initial cost of home= $270,000+$45,000= $315,000.

Recognized gain= $800,000 - $315,000 = $485,000.

Remember, it was mentioned that Abigail and Darcy immediately purchased another home for $800,000. Very likely this money was derived from the first and only home they ever sold.

Therefore, their recognized gain after substracting the cost is $485,000.