During 2012, Ted and Judy, a Married Couple, Decided to Sell

question 56

Multiple Choice

During 2012, Ted and Judy, a married couple, decided to sell their residence, which had a basis of $225,000.They had owned and occupied the residence for 16 years.To make it more attractive to prospective buyers, they had the outside painted in April at a cost of $10,000 and paid for the work immediately.They sold the house in May for $795,000.Broker's commissions and other selling expenses amounted to $45,000.Since they both are age 68, they decide to rent an apartment. They purchase an annuity with the net proceeds from the sale.What is the recognized gain?

• A)$0.
• B)$15,000.
• C)$25,000.
• D)$525,000.
• E)None of the above.

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Definitions:

Accounts Payable

Liabilities to suppliers or creditors for items or services purchased on credit.

Merchandise Inventory

The total cost of all the goods owned by a company that are intended for sale, during a particular accounting period.

Permissive Parents

A parenting style characterized by low demands with high responsiveness, where parents are very lenient and often only step in when serious problems arise.

Responsive

Quick to react or respond positively or sympathetically.