Which of the Following Statements Regarding the Exclusion of Gain

question 72

Multiple Choice

Which of the following statements regarding the exclusion of gain on the sale of a principal residence is correct?

• A)A taxpayer may not exclude gain if the taxpayer is renting the residence at the time of the sale.
• B)A taxpayer may simultaneously own two homes that are eligible for the home sale exclusion.
• C)A taxpayer must be living in a residence at the time it is sold to qualify for the exclusion.
• D)For a married couple to qualify for the $500,000 exclusion, both spouses must meet the ownership and use tests.

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Definitions:

Freedom of Contract

The principle that individuals have the liberty to enter into agreements as they choose without unjust government interference.

Noncompetition Clause

A provision in a contract that prohibits one party from competing with another party for a certain period of time and within a certain geographic area.

Legitimate Business Purpose

A rational, honest intention or objective behind a business action or decision, often considered in legal contexts to validate transactions.

Geographic Area

A specific portion of the Earth's surface defined by natural or artificial boundaries, characterized by distinct physical, administrative, or cultural properties.