Question

# Jamie bought her house in 2009 for \$395,000. Since then, she has deducted \$70,000 in depreciation...

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

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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