Question

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	$

Answer 1

a) Realized gain = 178,800

Sale price

Less: Adjusted basis

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