On February 1, 2020, Stephen (Who Is Single)sold His Principal

question 80

Multiple Choice

On February 1, 2020, Stephen (who is single) sold his principal residence (home 1) at a $100,000 gain. He was able to exclude the entire gain on his 2020 tax return. Stephen purchased and moved into home 2 on the same day. Assuming Stephen lives in home 2 as his principal residence until he sells it, which of the following statements is true?

• A)Under no circumstance will Stephen be allowed to exclude gain on home 2 if he sells home 2 in 2021.
• B)Stephen will be eligible to exclude gain on home 2 only if he waits until 2025 to sell it.
• C)In certain circumstances, Stephen may be able to exclude gain on home 2 even if he sells home 2 in 2020.
• D)None of the choices are correct.

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Definitions:

First Stage Allocations

The initial process of assigning overhead costs to different departments or cost pools in activity-based costing.

Supervising Activity

The process of overseeing and directing work activities and tasks to ensure they are executed efficiently and effectively, typically within a workplace.

Activity-Based Costing

A costing method that assigns costs to products and services based on the activities and resources that go into creating them.

Overhead Cost

Refers to all ongoing business expenses not directly tied to producing a specific product or service, such as rent, utilities, and administrative salaries.