Question

calculate C's net capital gain or loss for House A (assuming she has no other CGT events)


C purchased House A in Perth on 1 February 2012 for $450 000 and moved into it straight away. On 1 January 2013 C decided to move to Melbourne where she rented House B for herself. She decided to get tenants to move into House A. The market value of House A at that time was $500 000. C soon had enough of Melbourne and decided to move back to House A in Perth on 1 February 2017. She sold House A for $600 000 on 5 March 2018 and incurred $ 3 000 expenses from advertising the house for sale.

Answer 1

The amount of C's net capital gain is calculated as below:

Sales Value	600,000
Less Advertising Expenses	3,000
Amount Realized from Sale	597,000
Adjusted Basis	450,000
Net Capital Gain from Sale of Property	$147,000

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Notes:

As the transaction is resulting in a gain, we will take the cost as the adjusted basis at the time of determining capital gain. We would have taken the lesser of adjusted basis or market value if the transaction would have resulted in loss.