Which of the Following Statements Regarding a Taxpayer's Principal Residence

question 92

Multiple Choice

Which of the following statements regarding a taxpayer's principal residence is true forthe purposes of determining whether the taxpayer is eligible to exclude gain realized on the sale of the residence?

• A)A taxpayer may have more than one principal residence at any one time.
• B)A taxpayer's principal residence may not be a houseboat.
• C)A taxpayer with more than one residence may annually elect which residence is considered to be the principal residence.
• D)None of the choices are correct.

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Definitions:

Straight-Line Depreciation

An approach to distribute the cost of a tangible asset evenly over each year of its expected life.

Fixed Asset

Long-term tangible property or equipment that a firm owns and uses in its operations to generate income, not expected to be consumed or converted into cash within a year.

Cash Payback Method

A capital budgeting technique that estimates the time required to recoup the initial investment in a project, using cash inflows.

Average Rate of Return

A financial metric used to estimate the profitability of an investment, calculated by dividing the average annual profit by the initial investment cost.