Paula Inherits a Home on July 1,2016 That Had a Basis

question 103

Multiple Choice

Paula inherits a home on July 1,2016 that had a basis in the hands of the decedent at death of $290,000 and a fair market value of $500,000 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 $125,000 and move into the inherited home.On September 16,2016,she sells the old residence for $600,000.Paula incurs selling expenses of $30,000 and legal fees of $2,000.She decides to add a pool,deck,pool house,and recreation room to the inherited home at a cost of $100,000.These additions are completed and paid for on November 1,2016.What is her recognized gain on the sale of her old principal residence and her basis in the inherited home?

• A)$0;$500,000.
• B)$193,000;$600,000.
• C)$443,000;$600,000.
• D)$475,000;$600,000.
• E)None of the above.

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Definitions:

Eustress

Positive stress that arises from situations that are perceived as challenging but beneficial, promoting growth and accomplishment.

Exhaustion Stage

The final stage of the stress response, characterized by depleted resources and decreased ability to cope with stress.

General Adaptation Syndrome

A theoretical model describing the body's short-term and long-term reactions to stress, consisting of three stages: alarm, resistance, and exhaustion.

Cognitive Impact

The effect of various factors on cognitive processes, such as perception, memory, and reasoning, influencing how we think and understand the world.