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:

Kilowatt-Hour

A unit of energy equivalent to one kilowatt of power expended for one hour, used to measure electricity consumption.

Property Taxes

Taxes levied by local governments based on the assessed value of real estate property owned by individuals or businesses.

Fixed Cost

A cost that does not change with an increase or decrease in the quantity of goods or services produced or sold.

Accounting Salaries

The wages or salaries paid to employees working in the accounting department, reflecting the cost associated with managing financial records and reports.