Darren (Single)purchased a Home on January 1,2013 for $400,000

question 56

Essay

Darren (single)purchased a home on January 1,2013 for $400,000.Darren lived in the home as his primary residence until January 1,2015 when he began using the home as a vacation home.He used the home as a vacation home until January 1 2016 (he used a different home as his primary residence from January 1,2015 to January 1,2016).On January 1,2016,Darren moved back into the home and used it as his primary residence until January 1,2017 when he sold the home for $500,000.What amount of the $100,000 gain Darren realized on the sale must he recognize for tax purposes in 2017?

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Definitions:

Balance Sheet

A financial statement that summarizes a company's assets, liabilities, and shareholders' equity at a specific point in time, providing a snapshot of its financial condition.

Revenue from Sales

Represents the income that a company generates from its business activities, typically from the sale of goods or services to customers.

Cost of Merchandise Sold

The direct costs tied to producing the goods that a company sells, thus a direct reflection of the cost of inventory sold.

Gross Profit

The difference between revenue and the cost of goods sold, excluding other operating expenses and taxes.