Matt, Who Is Single, Sells His Principal Residence, Which He

question 56

True/False

Matt, who is single, sells his principal residence, which he has owned and occupied for five years, for $435,000.The adjusted basis is $140,000 and the selling expenses are $20,000.Three days after the sale, he purchases another residence for $385,000.Matt's recognized gain is $25,000 and his basis for the new residence is $385,000.

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Definitions:

Explicit Costs

Direct payments made to others in the course of running a business, such as wages, rent, and materials.

Total Revenues

The overall amount of money generated by a business from its sales or services before any costs or expenses are deducted.

Normal Rate

The standard or average rate at which something occurs, such as interest rates, inflation, or unemployment rates.

Accounting Profit

The net income of a business as calculated by subtracting total expenses from total revenues, according to standard accounting principles.