Section 121 Exclusion. P and Q, who are married, sold their residence of 19 years on February 12, 2021. The house had cost $120,000 and improvements of $22,000 had been made. The house sold for $750,000. Selling costs of $37,500 were incurred and deferred maintenance costs of $4,500 were paid weeks before the sale. P and Q have taxable income not including this gain of $70,000 on their joint return for the year.
Section 121 Exclusion. P and Q, who are married, sold their residence of 19 years on February 12, 2021. The house had cost $120,000 and improvements of $22,000 had been made. The house sold for $750,000. Selling costs of $37,500 were incurred and deferred maintenance costs of $4,500 were paid weeks before the sale. P and Q have taxable income not including this gain of $70,000 on their joint return for the year.
Chapter5: Corporations: Earnings & Profits And Dividend Distributions
Section: Chapter Questions
Problem 26P
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Transcribed Image Text:5. Section 121 Exclusion. P and Q, who are married, sold their residence of 19 years on
February 12, 2021. The house had cost $120,000 and improvements of $22,000 had
been made. The house sold for $750,000. Selling costs of $37,500 were incurred and
deferred maintenance costs of $4,500 were paid weeks before the sale. P and Q have
taxable income not including this gain of $70,000 on their joint return for the year.
a. How much is P and Q's gain realized on this sale?
b. How much of that gain, if any, must be recognized? How will it be taxed?
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