Question
Missy, age 30, has owned her principal residence (adjusted basis of $225,000) for five years. During the first three years of ownership, she occupied it
Missy, age 30, has owned her principal residence (adjusted basis of $225,000) for five years. During the first three years of ownership, she occupied it as her principal residence. During the past two years, she was in graduate school and rented the residence. After graduate school, Missy returned to the same location where she previously worked. At this point, she purchased another residence for $400,000 and listed her old residence for sale at $340,000. Due to a slow real estate market, 11 months later Missy finally receives an offer of $330,000.
- What is Missys recognized gain if she immediately accepts the $330,000 offer (i.e., 11 months after the listing date)? Selling expenses are $20,000.
- What is Missys recognized gain if she rejects the $330,000 offer and accepts another offer of $340,000 three months later (i.e., 14 months after the listing date)?
- Advise Missy on which offer she should accept (assume that she is in the 24% tax bracket).
explain the answer.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started