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28 December, 23:13

On July 1, 2019, Ted, age 73 and single, sells his personal residence of the last 30 years for $368,000. Ted's basis in his residence is $48,776. The expenses associated with the sale of his home total $22,080. On December 15, 2019, Ted purchases and occupies a new residence at a cost of $175,000. Calculate Ted's realized gain, recognized gain, and the adjusted basis of his new residence.

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  1. 28 December, 23:33
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    Realized gain is $297,144

    Recognized gain is $47,144

    Adjusted basis for new residence is $175,000

    Explanation:

    •Ted's Realized gain:

    Sales price $368,000 - basis $48,776 - expenses $22,080 = $297,144.

    • Ted's Recognized gain:

    Realized gain $297,144 - exclusion upto $250,000 = $47,144.

    • Ted's basis of the new residence is its cost of $175,000.
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