56. LO.4 Nell, Nina, and Nora Sanders, who are sisters, sell their principal residence

(owned as tenants in common) in which they have lived for the past 25 years. The youngest of the sisters is age 60. The selling price is $960,000, selling expenses and legal fees are $63,000, and the adjusted basis is $120,000 (the fair market value of the residence when inherited from their parents 25 years ago). Because the sisters are going to live in rental housing, they do not plan to acquire another residence. Nell has contacted you on behalf of the three sisters regarding the tax consequences of the sale.

a. Write a letter to Nell advising her of the tax consequences and how taxes can be minimized. Nell’s address is 100 Oak Avenue, Billings, MT 59101.

b. Prepare a memo for the tax files.