Carlos, Who Is Single, Sells His Personal Residence on November

question 266

Essay

Carlos, who is single, sells his personal residence on November 5, 2018, for $400,000. His adjusted basis was $125,000. He pays realtor's commissions of $20,000. He owned and occupied the residence for 12 years. Having decided that he no longer wants the burdens of home ownership, he invests the sales proceeds in a mutual fund and enters into a 1-year lease on an apartment. The detriments of renting, including a crying child next door, cause Carlos to rethink his decision. Therefore, he purchases another residence on November 6, 2019, for $275,000. Is Carlos eligible for exclusion of gain treatment under § 121 (exclusion of gain on sale of principal residence)? Calculate Carlos's recognized gain and his basis for the new residence.

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Definitions:

BOGO Deal

A sales promotion where a customer buys one item and gets another one for free or at a reduced rate; stands for "Buy One, Get One."

Camera Quality

The measure of a camera's ability to reproduce accurate images, influenced by its sensor size, resolution, lens clarity, and low-light performance.

Retail Price

The price at which a product is sold to the end consumer, typically set by retailers to cover costs and include a profit margin.

Independent Rating Agency

An organization unaffiliated with companies or government entities that provides objective assessments of financial instruments or credit risk.