USCPA2014考试真题-REG-10

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10 2014 AICPA Newly Released Questions – Regulation

10. CPA-08440

Baker, an unmarried individual, sold a personal residence, which has an adjusted basis of $70,000, for $165,000. Baker owned and lived in the residence for seven years. Selling

expenses were $10,000. Four weeks prior to the sale, Baker paid a handyman $1,000 to paint and fix up the residence. What is the amount of Baker's recognized gain?

a. $0

b. $84,000

c. $85,000

d. $95,000

AICPA Difficulty Rating: MEDIUM

Question Title: AICPA Newly Released 2014

Lecture to be assigned to: R-4

Topic to be assigned to: Property Taxation 1

Page reference (page # and outline point): R4-13, II. C. 1.

ANSWER:

Choice "a" is correct. This is a principal residence that the taxpayer has owned and lived in for the last seven years. This exceeds the requirement of at least two of the last five years. Baker may therefore exclude up to $250,000 of gain. The realized gain is $84,000 ($165,000 selling price – $70,000 adjusted basis – $10,000 selling expenses – $1,000 fix-up expenses incurred within 90 days of the sale). All of the realized gain is excluded, and none of it is recognized. Choice "b" is incorrect. $84,000 is the correct realized gain. But none of the gain is recognized, due to the homeowner's exclusion.

Choice "c" is incorrect. $85,000 is the realized gain before considering the fix-up expenses of $1,000. But none of the gain is recognized, due to the homeowner's exclusion.

Choice "d" is incorrect. $95,000 is the realized gain before considering the selling expenses and fix-up expenses. But none of the gain is recognized, due to the homeowner's exclusion.