Virginia, Who Is Single, Sells Her Principal Residence (Adjusted Basis

question 36

Multiple Choice

Virginia, who is single, sells her principal residence (adjusted basis of $150,000) on January 5, 2012, for $380,000.She has owned and occupied it as her principal residence for 20 years.She incurs a realtor's commission of $22,000 and legal fees of $5,000.On January 3, 2012, Virginia purchases a townhouse for $300,000 and uses it as her principal residence.Because it was not near a convenience store, she sells the townhouse on December 20, 2012, for $330,000.She incurs a realtor's commission of $18,000 and legal fees of $4,000.She buys a house on December 1, 2012, for $250,000 and uses it as her principal residence.What is Virginia's recognized gain on the sale of each house and her adjusted basis for the house purchased on December 1, 2012?

• A)$0; $0; and $250,000.
• B)$0; $8,000; and $250,000.
• C)$203,000; $0; and $250,000.
• D)$0; $8,000; and $47,000.
• E)None of the above.

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Definitions:

LIFO Method

The Last In, First Out method for inventory valuation where the most recently produced or purchased items are the first to be expensed.

Operating Profit or Loss Test

A financial assessment that determines a company's profitability from its core business operations, excluding income and expenses from unusual, non-recurring, or financial activities.

Operating Segments

Components of a business for which separate financial information is available and is evaluated regularly by the entity's chief operating decision maker.

Reportable

Pertains to information or actions that need to be disclosed officially, usually due to regulatory requirements.