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

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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

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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
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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 ago

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