Eric and Faye, Who Are Married, Jointly Own a House

question 251

Multiple Choice

Eric and Faye, who are married, jointly own a house in which they have resided for the past 17 years. They sell the house for $375,000 with realtor's fees of $10,000. Their adjusted basis for the house is $80,000. Since they are in their retirement years, they plan on moving around the country and renting. What is their recognized gain on the sale of the residence if they use the § 121 exclusion (exclusion of gain on sale of principal residence) and if they elect to forgo the § 121 exclusion? With exclusion Elect to forgo

• A) $0 $0
• B) $35,000 $35,000
• C) $0 $285,000
• D) $35,000 $285,000
• E) $285,000 $225,000

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Definitions:

Counterconditioning

Counterconditioning is a therapy technique used to replace negative or harmful responses to a stimulus with positive ones.

Systematic Desensitization

A behavioral therapy technique used to reduce phobic reactions through gradual exposure to the feared object or situation.

Spontaneous Recovery

The reappearance of a previously extinguished conditioned response after a period of time without exposure to the conditioned stimulus.

Mental Representation

An internal image or concept of an external reality or abstract idea.