Question

# Problem 8-15 (Algorithmic) Sale of a Personal Residence (LO 8.12) Larry Gaines, age 42, sells his...

Problem 8-15 (Algorithmic)
Sale of a Personal Residence (LO 8.12)

Larry Gaines, age 42, sells his personal residence on November 12, 2017, for \$178,800. He lived in the house for 7 years. The expenses of the sale are \$12,516, and he has made capital improvements of \$5,364. Larry's cost basis in his residence is \$103,704. On November 30, 2017, Larry purchases and occupies a new residence at a cost of \$223,500.

Calculate Larry's realized gain, recognized gain, and the adjusted basis of his new residence.

If an amount is zero, enter "0".

 a. Realized gain \$ b. Recognized gain \$ c. Adjusted basis of new residence \$

a) Realized gain = 178,800

Sale price

Sale expenses = 12,516

Capital improvements = 5,364

Cost basis = 103,704       121,584

Realized gain                    \$ 57,216

b) Recognized gain

Recognized gain would be "0" because he will get the benefit upto \$250,000 from sale of his residence.

c) Adjusted basis of New residence

Adjusted basis of new residence is the cost price which is \$223,500.

Summary :-

a) Realized gain = \$57,216

b) Recognized gain = 0

c) Adjusted basis of New residence = \$223,500

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