Paula Inherits a Home on July 1,2015 That Had a Basis

question 169

Multiple Choice

Paula inherits a home on July 1,2015 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 16,2015,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 1,2015.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.

---

Definitions:

Predictable Pattern

A consistent and repeatable sequence observed in data, activities, or behaviors over time.

Systematic Trends

Patterns or movements in data that consistently occur over a specified period, indicative of a broader phenomenon or change.

Equilibrium Price

The equilibrium price is the market price at which the quantity of goods supplied equals the quantity demanded, leading to a balance in the market.

Market

A space or system in which parties engage in exchange, buying and selling goods and services.