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On January 5,2010,Bill sells his principal residence with an adjusted basis of $185,000 for $500,000.He has owned and occupied the residence for 18 years.He pays $30,000 in commissions and $1,200 in legal fees in connection with the sale.One month before the sale,Bill painted the house at a cost of $4,000 and repaired various items at a cost of $2,500.On October 15,2010,Bill purchases a new home for $400,000.On November 15,2011,he pays $25,000 for completion of a new room on the house,and on January 14,2012,he pays $15,000 for the construction of a pool.What is the Bill's recognized gain on the sale of his old principal residence and what is the basis for the new residence?
Explicit Costs
Direct monetary expenses incurred in the course of doing business, such as wages, rent, and materials.
Peak Efficiency
The optimal point at which a particular process or system operates with maximum effectiveness or efficiency.
MC = MR
The point where Marginal Cost equals Marginal Revenue, considered the optimal point of production for maximum profit.
ATC Curve
A graph showing the average total cost of production at different levels of output, illustrating how costs vary with changes in output.
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