Eric and Katie, Who Are Married, Jointly Own a House

question 131

Short Answer

Eric and Katie, who are married, jointly own a house in which they have resided for the past 17 years. They sell the house for $375,000 with realtor's fees of $10,000. Their adjusted basis for the house is $80,000. Since they are in their retirement years, they plan on moving around the country and renting. What is their recognized gain on the sale of the residence if they use the § 121 exclusion (exclusion of gain on sale of principal residence) and if they elect to forgo the § 121 exclusion? $\begin{array}{ll}\text { WithExclusion }&\text { ElecttoForgo }\\\text { a. } \$ 0 & \$ 0 \\\text { b. } \$ 35,000 & \$ 35,000 \\\text { c. } \$ 0 & \$ 285,000 \\\text { d. } \$ 35,000 & \$ 285,000 \\\text { e. } \$ 285,000 & \$ 225,000\end{array}$

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Definitions:

Strong Moral Values

The possession of core ethical beliefs and principles that guide an individual's behaviors and decision-making processes.

Strong Conscience

A deeply held sense of right and wrong that guides a person's actions and decisions.

Fixed Capacity

The concept that certain abilities or resources have a set limit that cannot be exceeded.

Values

Fundamental beliefs or standards that guide behavior and decision-making in individuals or groups.