Question

Constanza, who is single, sells her current personal residence (adjusted basis of $213,000) for $596,400. She has owned and lived in the house for 30 years. Her selling expenses are $29,820. What is Constanza’s realized and recognized gain? Constanza’s realized gain is $_________ and her recognized gain would be___________?

Answer 1

Answer:

Realized gain = $353,580.

Recognized gain = $103,580

Explanation:

Data provided in the question:

Sales = $596,400

Adjusted basis = $213,000

Selling expenses = $29,820

Now,

Amount realized = Sales - Selling expense

= $596,400 - $29,820

= $566,580

Realized gain = Amount realized - Adjusted basis

= $566,580 - $213,000

= $353,580

Recognized gain = Realized gain - Exclusions

also,

since Constanza is single her exclusion will be $250,000

Hence,

Recognized gain = $353,580 - $250,000

= $103,580