Larry Owned and Lived in a Home for Five Years

question 84

Multiple Choice

Larry owned and lived in a home for five years before marrying Darlene. Larry and Darlene lived in the home for one year before selling it at a $600,000 gain. Larry was the sole owner of the residence until it was sold. How much of the gain may Larry and Darlene exclude?

• A) $0.
• B) $250,000.
• C) $500,000.
• D) $600,000.

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Definitions:

Compounded Monthly

A method of calculating interest where interest earned is added to the principal monthly, so each subsequent interest calculation is on an increased amount.

Monthly Compounding

A method of calculating interest whereby the interest is calculated and added to the principal amount at the end of each month.

Compounded Monthly

A term used in finance to describe a situation where interest is added to the principal balance of an investment, loan, etc., on a monthly basis, and future interest is then earned on the resulting new balance.

Compounded Quarterly

The method of computing interest that includes the original amount plus the interest accrued over periods of three months.