Evelyn, a Calendar Year Taxpayer, Lists Her Principal Residence with a Realtor

question 158

Multiple Choice

Evelyn, a calendar year taxpayer, lists her principal residence with a realtor on February 7, 2014, enters into a contract to sell on July 12, 2014, and sells (i.e., the closing date) the residence on August 1, 2014. The realized gain on the sale is $225,000. Which date is the appropriate ending date in determining if the residence has been owned and used by the Evelyn as the principal residence for at least two years during the prior five-year period?

• A) February 7, 2014.
• B) July 12, 2014.
• C) August 1, 2014.
• D) December 31, 2014.
• E) None of the above.

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Definitions:

Risk-Free Interest

The rate of return on an investment with no risk of financial loss, typically associated with government bonds.

Net Present Value

The difference between the present value of cash inflows and the present value of cash outflows over a period of time.

Straight Bond Value

The value of a bond that pays a fixed interest rate (coupon rate) and does not have any embedded options such as convertibility or callability.

Convertible Bond

A bond that offers the option to be exchanged for a specific quantity of the issuing company's stock at chosen intervals throughout its tenure, generally at the choice of the person holding the bond.