Problem 15-51 (LO. 4) Wesley, who is single, listed his personal residence with

Question

Problem 15-51 (LO. 4) Wesley, who is single, listed his personal residence with a real estate agent on March 3, 2017, at a price of $390,000. He rejected several offers in the $350,000 range during the summer. Finally, on August 16, 2017, he and the purchaser signed a contract to sell for $363,000. The sale (i.e., closing) took place on September 7, 2017. The closing statement showed the following disbursements: Real estate agent's commission Appraisal fee Exterminator's certificate Recording fees Mortgage to First Bank Cash to seller $21,780 600 300 800 305,000 34,520 Wesley's adjusted basis for the house is $200,000. He owned and occupied the house for seven years. On October 1, 2017, Wesley purchases another residence for $325,000. If an amount is zero, enter "O" a. Wesley's recognized gain on the sale is b. Wesley's adjusted basis for the new residence is c.Assume instead that the selling price is $800,000. Wesley's recognized gain is ,and his adjusted basis for the new residence is

Explanation / Answer

SOLUTION

(A)

(B) Wesley’s basis for his new residence is its cost of $325,000.

(C)

Because Wesley is single, his maximum 121 exclusion is $250,000. Wesley’s basis for his new residence is its cost of $325,000.

Amount ($) Amount ($) Selling price 363,000 Less selling expenses:   Real estate agent’s commission 21,780   Appraisal fee 600   Exterminator’s certificate 300   Recording fees 800 (23,480) Amount Realized 339,520 Amount Realized 339,520 Adjusted basis (200,000) Realized gain 139,520 121 exclusion (139,520) Recognized gain 0

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