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30 April, 22:41

Michael (single) purchased his home on July 1, 2009. He lived in the home as his principal residence until July 1, 2017 when he moved out of the home and rented it out until July 1, 2018 when he moved back into the home. On July 1, 2019 he sold the home and realized a $300,000 gain. What amount of the gain is Michael allowed to exclude from his 2018 gross income?

A. $0

B. $225,000

C. $250,000

D. $300,000

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Answers (1)
  1. 30 April, 23:57
    0
    correct option is C. $250,000

    Explanation:

    given data

    sold the home and gain = $300,000

    to find out

    amount of the gain allowed to exclude from gross income

    solution

    we know that Michael owned the property for the 10 years

    so here Michael is not allowed to exclude the gain = 10 % that is $30,000

    and The maximum gain exclusion permitted = $250000

    so here Michael will recognize $50,000 because amount exceed $250,000 for a single taxpayer and exclusion of gain on sales of property tax payer need to own and occupy the property as principle residence for the 2 out of 5 year immediately preceding the sales

    so here correct option is C. $250,000
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