Question

2. Steve Pratt, who is single, purchased a home in Spokane, Washington, for $615,000. He moved into the home on February 1 of year 1. He lived in the home as his primary residence until June 30 of year 5, when he sold the home for $912,500. (Leave no answer blank. Enter zero if applicable.)

a. What amount of gain will Steve be required to recognize on the sale of the home?

	Recognized gain on sale ?

b. Assume the original facts, except that the home is Steve’s vacation home and he vacations there four months each year. Steve does not ever rent the home to others. What gain must Steve recognize on the home sale?

Recognized gain on sale ?

c. Assume the original facts, except that Steve married Stephanie on February 1 of year 3 and the couple lived in the home until they sold it in June of year 5. Under state law, Steve owned the home by himself. How much gain must Steve and Stephanie recognize on the sale (assume they file a joint return in year 5).

Recognized gain on sale ?

5. In year 1, Peter and Shaline Johnsen moved into a home in a new subdivision. Theirs was one of the first homes in the subdivision. In year 1, they paid $4,100 in real property taxes to the state government, $1,200 to the developer of the subdivision for an assessment to pay for the sidewalks, and $890 for real property taxes on land they hold as an investment. What amount of property taxes are the Johnsens allowed to deduct assuming their itemized deductions exceed the standard deduction amount before considering any property tax deductions?

	Deductible tax amount ?

Answer 1

Since multiple questions have been posted, I have answered all the parts of first question.

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Question 2:

Part a)

The amount of recognized gain on sale is determined as below:

Sales Value	912,500
Less Adjusted Basis	615,000
Gain Realized	297,500
Gain Exclusion (as property is used for atleast 2 years out of the 5 years ending on the date of sale)	250,000
Recognized Gain on Sale	$47,500

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Notes:

Maximum exclusion for a single taxpayer is limited to $250,000 as per applicable IRS rules.

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Part b)

The value of recognized gain on sale is arrived as below:

Sales Value	912,500
Less Adjusted Basis	615,000
Gain Realized	297,500
Gain Exclusion (as property is not used for atleast 2 years as principal residence out of the 5 years ending on the date of sale)	0
Recognized Gain on Sale	$297,500

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Part c)

The value of recognized gain on sale is determined as follows:

Sales Value	912,500
Less Adjusted Basis	615,000
Gain Realized	297,500
Gain Exclusion (as property is used for atleast 2 years as principal residence by the couple out of the 5 years ending on the date of sale)	297,500
Recognized Gain on Sale	$0

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Notes:

Maximum exclusion for a married couple filing joint return is limited to $500,000 as per applicable IRS rules. Therefore, the entire amount of gain realized on sale of property will get excluded.