Clem and Chloe, a married couple, sell their principal residence that they have owned and occupied for the past twenty years. the adjusted basis for the residence is $324,000. They incurred selling expense of $30,000. How much gain must they recognize if they sell the residence for $904,000?a. $50,000b. $290,000c. $40,000d. $300,000
Clem and Chloe, a married couple, sell their principal residence that they have owned and occupied for the past twenty years. the adjusted basis for the residence is $324,000. They incurred selling expense of $30,000. How much gain must they recognize if they sell the residence for $904,000?
- a. $50,000
- b. $290,000
- c. $40,000
- d. $300,000
Disposal of Assets: Disposal is an activity of selling the worn-out assets that is no longer in need for the business, in return of some consideration. Disposal may be made in any of the following situations:
- Disposal with no gain no loss: When the asset is disposed with no consideration received.
- Disposal with gain: When the asset is disposed for more than its book value (original cost less accumulated depreciation).
- Disposal with loss: When the asset is disposed for less than its book value.
Compute the amount of gain recognized on the sale of residence:
Note: If the owner of the house occupied and lives in the house for two of the five years before the sale (house), then the owner is eligible for a tax-free amount of $250,000. If they are married and filed a joint re...
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