Question
In: Accounting
steven pratt, who is single, purchased a home in Spokane, Washington, for $525,000. he moved into...
steven pratt, who is single, purchased a home in Spokane, Washington, for $525,000. 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 $855,00. (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
can you please help me and you type it out thank you
Solutions
Expert Solution
| Part A | ||||||
| Steve pratt moved into his new house as his primary residence on Feb 1 of year 1 and stayed till june 30 of year 5. This makes his stay in his primary residence more than 2 years thus making him eligible for gain exclusion. Gain exclusion limit for single tax payer is $250000 | ||||||
| Sales revenue | 855000 | |||||
| Less :Purchase price | -525000 | |||||
| Gain to be realised | 330000 | |||||
| Less: Gain exclusion available | -250000 | |||||
| Gain to be recognised | 80000 | |||||
| Part B | ||||||
| Steve will recognise the whole gain as home is not his principal residence for 2 years in immediated 5 years before the sale of home. | ||||||
| Sales revenue | 855000 | |||||
| Less :Purchase price | -525000 | |||||
| Gain to be realised | 330000 | |||||
| Part C | ||||||
| Steve and stephanie got married on Feb 1 of year 3 and stayed till june of year 5 thus making them eligible for gain exclusion as the stay in their primary residence is more than 2 years. Gain exclusion limit for joint return is $500,000 | ||||||
| Sales revenue | 855000 | |||||
| Less :Purchase price | -525000 | |||||
| Gain to be realised | 330000 | |||||
| Less: Gain exclusion available | -500000 | |||||
| Gain to be recognised | 0 | |||||
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