Question

Sal bought a personal residence for $150,000. He made $150,000 of improvements during the three years he lived in it before he sold it. He sold the home for $750,000 and paid $50,000 in selling expenses, including the broker's commission. On what amount will he pay capital gains tax

Answer 1

Answer: $150,000

Explanation:

It should be noted that when an individual sells a personal residence, there's an exclusion of $250,000 on th capital gains tax.

Therefore, the amount that will be paid for capital gain tax will be:

Sales price = $750,000

Less: Cost price = $150,000

Less: Improvements = $150,000

Less: Selling expenses = $50,000

Less: Exclusion = $250,000

Capital gain tax = $150,000

Based on the above calculation, the capital gain tax is $150,000.