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Steve and Stephanie Pratt purchased a home in Spokane, Washington, for $400,000. They moved into the home on February 1 of year 1. They lived
Steve and Stephanie Pratt purchased a home in Spokane, Washington, for $400,000. They moved into the home on February 1 of year 1. They lived in the home as their primary residence until November 1 of year 1, when they sold the home for $500,000. The Pratts marginal ordinary tax rate is 35 percent. (Leave no answer blank. Enter zero if applicable.)
- a-1. Assume that the Pratts sold their home and moved because they did not like their neighbors. How much gain will the Pratts recognize on their home sale?
- a-2. At what rate, if any, will the gain be taxed?
- b. Assume the Pratts sell the home because Stephanies employer transfers her to an office in Utah. How much gain will the Pratts recognize on their home sale?
- c. Assume the same facts as in part (b), except that the Pratts sell their home for $700,000. How much gain will the Pratts recognize on the home sale? (Do not round intermediate calculations.)
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