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In: Accounting

Gary purchased a home for $125,000 on September 15, 2015 and Gary and Gerda moved in...

Gary purchased a home for $125,000 on September 15, 2015 and Gary and Gerda moved in on that day. On October 7, 2016, they were divorced, and as part of the divorce agreement, the home was transferred to Gertrude who sold the home on August 18, 2017 for $350,000. How much can Gertrude exclude from her gross income?

a. $350,000.

b. $250,000.

c. $225,000.

d. $0.

e. None of the above

. Assume instead that in the preceding problem, as part of the divorce agreement, Gary retained ownership of the residence but the use of the home was granted to Gertrude as long as Gary owns the residence. If Gary sold the residence on August 18, 2014 for $350,000, how much can Gary exclude on his 2014 Form 1040?

a.    $350,000.

b.    $250,000.

c.     $225,000.

d.    $0.

e.    None of the above.

Solutions

Expert Solution

Gary purchased a home for $125,000 on September 15, 2015 and Gary and Gerda moved in on that day. On October 7, 2016, they were divorced, and as part of the divorce agreement, the home was transferred to Gertrude who sold the home on August 18, 2017 for $350,000. How much can Gertrude exclude from her gross income?
a. $350,000.
b. $250,000.
c. $225,000.
d. $0.
e. None of the above
Gertrude sold the house capital gain tax would apply but he can exclude upto to $250,000, the actual capital gain $350,000 - $125,000 = $225,000 will be excluded from her gross income. The capital gains exclusion applies only if lived there for two years before selling the house and she met the condition of staying over for 2 years.
Assume instead that in the preceding problem, as part of the divorce agreement, Gary retained ownership of the residence but the use of the home was granted to Gertrude as long as Gary owns the residence. If Gary sold the residence on August 18, 2014 for $350,000, how much can Gary exclude on his 2014 Form 1040?
a. $350,000.
b. $250,000.
c. $225,000.
d. $0.
e. None of the above.
Gary who continues to own the house but doesn’t live in it, there’s a risk that the $250,000 exclusion might not apply when the house is sold but he can exclude $225,000 capital gain tax from gross income only under the condition Gary and Gertrude were divorced on the basis of the nonresident spouse (Gary ) can still take the exclusion on the basis of the resident (Gertrude).

ekkarill92 answered 1 year ago
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