Carl Sells His Principal Residence, Which Has an Adjusted Basis

question 176

Multiple Choice

Carl sells his principal residence, which has an adjusted basis of $150,000 for $200,000. He incurs selling expenses of $20,000 and legal fees of $2,000. He had purchased another residence one month prior to the sale for $380,000. What is the recognized gain or loss and the basis of the replacement residence if the taxpayer elects to forgo the §121 exclusion (exclusion of gain on sale of principal residence) ?

• A) $0 and $380,000.
• B) $0 and $408,000.
• C) $28,000 and $352,000.
• D) $28,000 and $380,000.
• E) None of the above.

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Definitions:

Purchased Goodwill

The amount paid in excess of the fair market value of net assets during the acquisition of a company.

Theoretical Characteristic

An abstract property or attribute foundational to theoretical models or concepts, often used in academic and scientific research.

Research and Development Costs

Expenses related to the investigation and creation of new knowledge, products, processes, or services.

Purchased Goodwill

The intangible asset recorded when a company acquires another business for more than the fair value of its net identifiable assets, representing non-physical assets like reputation and brand value.