Paula Inherits a Home on July 1,2010,that Had a Basis

question 191

Multiple Choice

Paula inherits a home on July 1,2010,that had a basis in the hands of the decedent at death of $180,000 and a fair market value of $345,000 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 $95,000 and move into the inherited home.On September 16,2010,she sells the old residence for $490,000.Paula incurs selling expenses and legal fees of $34,000.She decides to add a pool,deck,pool house,and recreation room to the inherited home at a cost of $85,000.These additions are completed and paid for on November 1,2010.What is her recognized gain on the sale of her old principal residence and her basis in the inherited home?

• A)$0;$180,000.
• B)$111,000;$265,000.
• C)$361,000;$265,000.
• D)$361,000;$430,000.
• E)None of the above.

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Definitions:

Dependent Variable

The variable in a study or experiment that is affected by changes in another variable and is measured or observed.

Significant Contribution

A meaningful impact or improvement made by an action, study, or individual that notably advances a field or solves a problem.

Sum of Squares

A statistical technique used to quantify the variation within a data set by summing the squared deviations of each data point from the mean.

Prediction Equation

An equation used to predict the value of a dependent variable based on the values of one or more independent variables.