Craig and Sally, a Married Couple, File a Joint Tax

question 74

Essay

Craig and Sally, a married couple, file a joint tax return and report taxable income (excluding their home sale) of $325,000 for 2017. They purchased their home on December 1, 2015 for $250,000 and have made $100,000 of improvements during the time they owned the home. They sold the home on May 31, 2017 after Craig accepted a job in another state netting $775,000 after the expenses of the sale. What are the tax consequences of this sale?

---

Definitions:

Credit Balance

A credit balance is the amount of money a financial account shows on the credit side, indicating funds received or owed to the account holder.

Jobs Completed

Refers to work or projects that have been finished within a specified accounting period.

Predetermined Overhead Rate

A rate used to allocate manufacturing overhead costs to individual units of product based on a specific costing activity.

Direct Materials Cost

Direct materials cost refers to the expenditure associated with the raw materials used directly in manufacturing a product.