During 2012, Zeke and Alice, a Married Couple, Decided to Sell

question 71

Multiple Choice

During 2012, Zeke and Alice, a married couple, decided to sell their residence, which had a basis of $200,000.They had owned and occupied the residence for 20 years.To make it more attractive to prospective buyers, they had the inside painted in April at a cost of $5,000 and paid for the work immediately.They sold the house in May for $800,000.Broker's commissions and other selling expenses amounted to $50,000.They purchased a new residence in July for $400,000.What is the recognized gain and the adjusted basis of the new residence?

• A)$45,000 and $400,000.
• B)$50,000 and $400,000.
• C)$100,000 and $600,000.
• D)$550,000 and $800,000.
• E)None of the above.

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Definitions:

Optimal Choice

The best possible selection among various alternatives, considering constraints and objectives, to maximize or minimize desired factors such as utility, profit, or costs.

Consumer

An individual or group that purchases goods and services for personal use and not for manufacture or resale.

Marginal Utility

The additional satisfaction or benefit gained from consuming one more unit of a good or service.

Pretzels

A type of baked pastry made from dough that is commonly shaped into a knot and often salted.