Paula Inherits a Home on July 1, 2014 That Had

question 251

Multiple Choice

Paula inherits a home on July 1, 2014 that had a basis in the hands of the decedent at death of $290,000 and a fair market value of $500,000 at the date of the decedent's death. She decides to sell her old principal residence, which she has owned and occupied for 9 years, with an adjusted basis of $125,000 and move into the inherited home. On September 16, 2014, she sells the old residence for $600,000. Paula incurs selling expenses of $30,000 and legal fees of $2,000. She decides to add a pool, deck, pool house, and recreation room to the inherited home at a cost of $100,000. These additions are completed and paid for on November 1, 2014. What is her recognized gain on the sale of her old principal residence and her basis in the inherited home?

• A) $0; $500,000.
• B) $193,000; $600,000.
• C) $443,000; $600,000.
• D) $475,000; $600,000.
• E) None of the above.

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Definitions:

Cocaine

A powerful stimulant drug derived from the leaves of the coca plant, mainly used recreationally for its euphoric effects.

Legalization

The process of making an act or substance legal that was previously illegal.

Drugs

Substances which are used for medication or in form of narcotics, which can potentially cause dependency and alter one’s physiological state.

Prescription Drug Abuse

The use of prescription medication in a manner not prescribed by a healthcare provider, often for non-medical reasons.