Question

Jamie bought her house in 2009 for $395,000. Since then, she has deducted $70,000 in depreciation associated with her home office and has spent $45,000 replacing all the old pipes and plumbing. In addition, she’s also spent $12,600 in general maintenance and repairs over the last six years.

She sells the house on July 1, 2019. Her realtor charged $34,700 in commissions. Prior to listing the house with the realtor, she spent $300 advertising in the local newspaper. Sammy buys the house for $500,000 in cash, and assumes (takes over) her mortgage of $194,000 on December 1, 2019. What is Jamie’s adjusted basis at the date of the sale and the amount realized? Show all of your work

Answer #1

**Solution:**

**Computation of adjusted basis:**

Cost | $395,000 |

Depreciation | $-70,000 |

Capital additions | $45,000 |

Adjusted basis |
$370,000 |

Note: Adjusted basis = Cost + Capital additions - Depreciation

**Computation of Amount realized:**

Sales proceeds | $500,000 |

Mortage assumed | $194,000 |

Realtor's commission | $-34,700 |

Advertising expense | $-300 |

General maintenance and repairs | $-12,600 |

Amount realized |
$646,400 |

Note: Amount realized = Sales proceeds + Mortgage assumed - Commission - Advertising expense - General maintenance expense

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