1. Sale of principal residence. Patricia bought a house on January 1, 2010, for $430,000. She immediately started using the house as her principal residence. She married Peter on January 1, 2018, and he immediately moved into the house. It was their principal residence until Patricia sold it on June 30, 2019, for $800,000. No unforeseen circumstances were involved. How much capital gain did they have to report on their joint return for this sale?

2. Capital gains. Erinna and Sophia are married and file jointly. In 2020, Erinna earned a salary of $74,800 and Sophia was a full-time student with no earnings. They also realized a gain of $40,000 on the sale of a capital asset that they had held for seven years. They had no other income or transactions. They had no for AGI or itemized deductions. How much of their capital gain is taxed at a 0% rate and how much at a 15% rate?

A. 0% rate: $5,600; 15% rate: $34,400

B. 0% rate: $0; 15% rate: $40,000

C. 0% rate: $30,000; 15% rate: $10,000

D. 0% rate: $40,000; 15% rate: $0

E. 0% rate: $20,000; 15% rate: $20,000

3. Depreciation. For her dry-cleaning business, Janet made a single asset purchase four years ago: she paid $48,000 for a dry-cleaning machine (a type of equipment) that she placed in service on April 3 of that year. On July 5 of this year, the fourth year she has used the machine, she sold it. How much depreciation should she claim for the machine this year?

4. Depreciation. Saengdao is a professional cellist and is self-employed. She bought a handmade cello in May of 2017 for $40,000. She used the cello in performances throughout the rest of 2017, all of 2018 and part of 2019. In November of 2019, she sold the cello for $37,000. Saengdao took depreciation deductions for the cello each year. Total depreciation at the time of the sale was $19,010. What is the amount and character of her income (or loss) from the sale?

A. $16,010 section 1231 gain

B. $16,010 ordinary income

C. $19,010 ordinary income; $3,000 section 1231 loss

D. $16,010 capital gain

5. Capital gains. This year, Winifred had one transaction involving a capital asset she held for less than a year: she realized a gain of $17,000. She had two transactions involving capital assets she held for more than a year: she realized a gain of $6,000 on one and a loss of $16,000 on the other. What is the total amount of capital gain that qualifies for preferential capital-gains tax rates (i.e., net capital gain or NCG).