Question
In: Accounting
Mr. and Mrs. Alvarez paid $130,000 for their home 30 years ago. They recently sold this...
Mr. and Mrs. Alvarez paid $130,000 for their home 30 years ago. They recently sold this home and moved into a rented apartment. Describe the tax consequences of the sale assuming that the amount realized was: a. $125,000 b. $450,000 c. $850,000
Solutions
Expert Solution
The above situation attracts tax consequences under the heads of income capital gains
It is a case of long term capital gain or loss
(a). Sale consideration $125,000
Cost of acquisition $130,000
-----------------------------------------------------------------------------
Long term capital loss. $ 5,000
(b). Sale consideration $ 450,000
Cost of acquisition $130,000
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Long term capital gain $ 320,000
(c). sale consideration $ 850,000
cost of acquisition $130,000
----------------------------------------------------------------------------
Long term capital gains $ 720,000
Indexed cost of acquisition has to be considered but in the given question is silent regarding it. Indexed cost of improvement Should also be reduced from sale consideration.
Thanking you. For any additional information or changes please comment.
ekkarill92 answered 1 year agoRelated Solutions
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