Question

Tom sold his home for $140,000 paying a 7% real estate commission. He bought the home for $45,000, paid $2,000 in closing costs, and added a new fireplace and family room for $35,000. After figuring the adjusted basis for this home, what is the amount of taxable gain?

Answer 1

Answer:

$48,200

Explanation:

Given:

Selling price of home = $140,000

Acquisition price = $45,000

Closing cost = $2,000

Cost of fireplace and family room = $35,000

Real estate commission = 0.07 × 140,000 = $9,800

Total adjusted basis  = 45,000 + 2,000 + 35,000 + 9,800

                                   = $91,800

Taxable gain = Selling price - adjusted basis

                      = 140,000 - 91,800

                      = $48,200