Carlos,who Is Single,sells His Personal Residence on November 5,2016,for $400,000

question 39

Essay

Carlos,who is single,sells his personal residence on November 5,2016,for $400,000.His adjusted basis was $125,000.He pays realtor's commissions of $20,000.He owned and occupied the residence for 12 years.Having decided that he no longer wants the burdens of home ownership,he invests the sales proceeds in a mutual fund and enters into a 1-year lease on an apartment.The detriments of renting,including a crying child next door,cause Carlos to rethink his decision.Therefore,he purchases another residence on November 6,2017,for $275,000.Is Carlos eligible for exclusion of gain treatment under § 121 (exclusion of gain on sale of principal residence)? Calculate Carlos's recognized gain and his basis for the new residence.

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Definitions:

Price-Earnings Ratio

A valuation ratio for a company that measures its current share price relative to its per-share earnings.

Year 2

Commonly refers to the second year in a sequence or series, often used in accounting or longitudinal studies.

Book Value Per Share

A financial measure that divides a company's shareholders' equity by its number of shares outstanding, indicating the accounting value per share.

Price-Earnings Ratio

The Price-Earnings Ratio (P/E Ratio) is a financial metric used to evaluate the value of a company's shares, calculated by dividing the current market price of a stock by its earnings per share.