Paula Inherits a Home on July 1, 2012, That Had

question 81

Multiple Choice

Paula inherits a home on July 1, 2012, that had a basis in the hands of the decedent at death of $290,000 and a fair market value of $500,000 at the date of the decedent's death.She decides to sell her old principal residence, which she has owned and occupied for 9 years, with an adjusted basis of $125,000 and move into the inherited home.On September 16, 2012, she sells the old residence for $600,000.Paula incurs selling expenses of $30,000 and legal fees of $2,000. She decides to add a pool, deck, pool house, and recreation room to the inherited home at a cost of $100,000.These additions are completed and paid for on November 1, 2012.What is her recognized gain on the sale of her old principal residence and her basis in the inherited home?

• A)$0; $500,000.
• B)$193,000; $600,000.
• C)$443,000; $600,000.
• D)$475,000; $600,000.
• E)None of the above.

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