Which of the Following Statements Are True with Respect to the Sale

question 2

Multiple Choice

Which of the following statements are true with respect to the sale of a principal residence?

• A) A one life-time exclusion of $125,000 is allowed for taxpayers under age 55
• B) All of the gains from the sale need not be used to purchase another residence
• C) The original cost basis is adjusted to include all costs related to the improvement of the property i.e. selling, remodeling, landscaping, etc.)
• D) Loss of a sale of residence is fully deductible
• E) B and C only

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Definitions:

Fixed Costs

Expenses that do not change in proportion to the activity of a business, such as rent, salaries, and insurance.

Monopolistically Competitive

A market scenario where various companies offer products that are substitutes but different enough to give the companies some price-setting power.

Profit-Maximizing

The process or strategy of adjusting production and sale practices to achieve the highest possible profit.

Short Run

A period in economics where at least one input is fixed while others are variable, affecting the level of output or production.