Manuel and Rita sell their home in Minneapolis for $495,000, incurring selling expenses of $25,000. They had purchased the residence for $85,000 and made capital improvements totaling $20,000 during the 20 years they lived there. They buy a new residence in Tampa for $225,000.
a. What are Manuel and Rita’s realized gain and recognized gain on the sale? What is their basis in the Tampa house?
b. Assume that Manuel and Rita sell the Minneapolis home for $675,000.What are their realized gain and recognized gain on the sale? What is their basis in the Tampa house?