Donald and Candice Sell Their Home for $695,000, Incurring Selling $\begin{array}{llcc} \text { Realized } & \text { Recognized} \\\end{array}$

question 21

Short Answer

Donald and Candice sell their home for $695,000, incurring selling expenses of $30,000. They purchased the residence for $125,000 and made capital improvements totaling $20,000 during the 20 years they lived there. What is their realized gain and recognized gain on the sale?
?
$\begin{array}{llcc} \text { Realized } & \text { Recognized} \\\end{array}$
A) $\$ 665,000 \quad \$20,000$
B) $\$ 520,000 \quad \$-0-$
C) $\$ 520,000 \quad \$ 20,000$
D) $\$ 540,000 \quad \$40,000$
E) $\$520,000 \quad \$270,000$

• A) \( \$ 665,000 \quad \$20,000 \)
• B) \( \$ 520,000 \quad \$-0- \)
• C) \( \$ 520,000 \quad \$ 20,000 \)
• D) \( \$ 540,000 \quad \$40,000\)
• E) \( \$520,000 \quad \$270,000 \)

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Definitions:

Inflation

The rate of growth in the average price of goods and services, which leads to a decline in the power of currency to buy goods.

Money-Supply Curve

A graphical representation showing the relationship between the quantity of money in the economy and the price level or interest rate.

Federal Reserve

The central banking system of the United States, responsible for setting monetary policy, regulating banks, maintaining financial stability, and providing financial services to depository institutions, the U.S. government, and foreign official institutions.

Interest Rate

The amount charged by a lender to a borrower for the use of assets, expressed as a percentage of the principal.