May purchase another residence for of Thonths later. a. May they exclude the Si10,000 gain, and if so, what is the basis of the residence pur- chased in July? b. May they defer the S110,000 gain, and if so, what is the basis of the residence pur- chased in July? l 12-47 Sale of a Principal Residence. Mr. and Mrs. Kitchens purchased their first home in Ohio for $135,000 on October 1,2015. Because Mr. Kitchens' employer transferred him to Utah, they sold the house for S160,000 on January 10, 2016. How much of the gain is recognized? 1:12-48 sale or Other Disposition of a Principal Residence. In 1970, Mr. and Mrs. Self purchased their first principal residence for S80,000. In 1995, they sold the house for S300,000 and purchased a new residence for S1.5 million. At that time, the Selfs were allowed to defer the $220,000 gain because they purchased a more expensive residence, but the basis of the residence was reduced by the gain deferred. The Taxpayer Relief Act of 1997 eliminated this deferral provision and made it easier for taxpayers who clude the gain resulting from the sale even ifthey not purchase a replacement residence. In 2001, the Sclfs spent $200,000 to add a porch to their house that overlooks the small pond behind their house. In 2004, they hired painters to paint the entire house at a cost of $18,000. They estimate that S20,000 has been spent on routine since 1995, but insurance of $11,000 was collected for the repairs resulting from a small tomado in 2008. No casualty loss deduction was allowed. They hold the residence as joint tenants