Question

In 2019, Mr. and Mrs. Underhill sold their home and moved into a senior citizen village. This home had been their principal residence for the past 30 years, and they originally purchased it for $170,000. Mr. and Mrs. Underhill file a joint return.

Compute their REALIZED and RECOGNIZED gain or loss on the sale assuming that they sold the house for:

1. $850,000

2. $160,000

3. $330,000

Make sure you calculate both the realized and recognized gain. Additionally, if you conclude that they have a recognized gain, then you must tell me the character of that gain.

Answer 1

1

Particulars	Amount
Selling price	$      850,000
Less: basis	$      170,000
Realized gain	$      680,000
Less: gain exclusion	$     (500,000)
Recognzied gain	$      180,000

2

Particulars	Amount
Selling price	$      160,000
Less: basis	$      170,000
Realized gain/ (loss)	$       (10,000)
Less: gain exclusion	$     (500,000)
Recognzied gain /(loss)	$                 -

3

Particulars	Amount
Selling price	$      330,000
Less: basis	$      170,000
Realized gain/ (loss)	$      160,000
Less: gain exclusion	$     (500,000)
Recognzied gain /(loss)	$                 -

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