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Lev
Lev, Tax Advisor
Category: Tax
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Experience:  Taxes, Immigration, Labor Relations
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Mathew Murphy, single, sold his home that he had owned for

Customer Question

Mathew Murphy, single, sold his home that he had owned for 20 years for $670,000. He purchased it for $110,000 and made $40,000 of capital improvements on the home during his time of ownership.(a) How much gain is excluded? How much is recognized?
(b) If Mathew purchased another home for $420,000, how much is excluded and recognized?
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Submitted: 7 months ago.
Category: Tax
Expert:  Lev replied 7 months ago.
(a) How much gain is excluded? How much is recognized?His adjusted basis is$110,000 (original purchase price) PLUS $40,000 (capital improvements) = $150,000His realized gain$670,000 9selling price) MINUS $150,000 (adjusted basis) = $520,000As a single person who used the property as a primary residence at least two out of last five years before teh sale - he is entitled for section 121 exclusion - $250,000So - his recognized gain would be$520,000 (realized gain MINUS $250,000 (section 121 exclusion) = $270,000That is recognized gain.
Expert:  Lev replied 7 months ago.
(b) If Mathew purchased another home for $420,000, how much is excluded and recognized?That is not relevant facts as related to the old law which was replaced in 1997..I appreciate if you take a moment to rate the answer.Experts are ONLY credited when answers are rated positively.If you still have any doubts, need clarification - please be sure to ask.I am here to help you with all tax related issues.

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