Question

Troy (single) purchased a home in Hopkinton, Massachusetts, on January 1, 2007, for $250,000. He sold the home on January 1, 2018, for $276,500. How much gain must Troy recognize on his home sale in each of the following alternative situations? Keep in mind that this problem uses 2018 tax rules.

a. Troy rented the home out from January 1, 2007, through November 30, 2008. He lived in the home as his principal residence from December 1, 2008, through the date of sale. Assume accumulated depreciation on the home at the time of sale was $7,300.

b. Troy lived in the home as his principal residence from January 1, 2007, through December 31, 2013. He rented out the home from January 1, 2014, through the date of the sale. Assume accumulated depreciation on the home at the time of sale was $2,150.

c. Troy lived in the home as his principal residence from January 1, 2007, through December 31, 2015. He rented out the home from January 1, 2016, through the date of the sale. Assume accumulated depreciation on the home at the time of sale was $0.

d. Troy rented out the home from January 1, 2007, through December 31, 2013. He lived in the home as his principal residence from January 1, 2014, through December 31, 2014. He rented out the home from January 1, 2015, through December 31, 2015, and lived in the home as his principal residence from January 1, 2016, through the date of the sale. Assume accumulated depreciation on the home at the time of sale was $0. (Do not round intermediate calculations. Round your final answer to the nearest whole dollar amount.)

Answer 1

Troy
a.Total Capital gain = $276,500 - $250,000 = $26,500
1Jan 2007 to Nov 30 2008= 1 year 11 months = 1.91666667
1.91666667 of 11 x $26,500 = $4,617.42
$26,500- $4,617.42= $21,882.58
Less depreciation = $21,882.58- $7,300 = $14,582.58
b.Period of 7 years
7/11 x 26,500 = $16,863.64
$16,863.64 - $2,150 = $14,713.64
c.9/11 x 26,500= $21,681.82
d.1/11 x 26,500 = $2,409.09
26,500 – 2,409.09 = $24,090.91
2/11 x 24,090.91 = $4,380.17