Accepted Answer

Hello renia,

Kay's basis in the home would be her purchase price of $180,000 plus the $50,000 she made in improvements, for a total of $230,000.

If she now sells the home for $390,000, she has a gain of $160,000. However, since she has owned her home for at least 2 years and she has also lived in the home for at least 2 of the previous 5 years, then she may claim the primary home exclusion which is $250,000 for single taxpayers. After deducting her allowed $250,000 exemption from her gain of $160,000, she actually ends up with a loss from the sale. While a loss on the sale of personal property cannot be taken as a tax deduction, at the same time she has no capital gain and no tax to pay on this transaction.

If this was helpful please press the Accept button. Positive feedback is also apprecited.

Thank you renia

Expert:	Merlo
Pos. Feedback:	99.8 %
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Answered:	10/20/2009

Accountant

25+ years tax consulting. Specializing in returns for US citizens living abroad