Question

Constanza, who is single, sells her current personal residence (adjusted basis of $165,000) for $450,000. She has owned and lived in the house for 30 years. Her selling expenses are $22,500. Constanza’s realized gain is ? and her recognized gain would be___________.

Answer 1

Answer:

Realized gain = $262,500

Recognized gain = $12,500

Explanation:

Data provided in the question:

Adjusted basis  = $165,000

Proceeds from selling = $450,000

Selling expenses = $22,500

Now,

Her § 121 exclusion from the gain of selling the property will be $250,000

Therefore,

Realized gain = Proceeds from selling - Selling expenses - Adjusted basis

= $450,000 - $22,500 - $165,000

= $262,500

Recognized gain = Realized gain - § 121 exclusion

= $262,500 - $250,000

= $12,500