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Charlie and his wife lived in the house for the last 15 years. In 2013 due to some unknown reasons, he demolished the house and constructed a house on the same lot. The house was completed in 2014 and decided not to stay in the same house. He sold the house in 2014 at a gain of $547,000. He excluded gain of $500,000 (exclusion allowed for MFJ) and paid capital gain on $47,000. He was audited for 2014 and the IRS had a different idea.

Charlie and his wife lived in the house for the last 15 years. In 2013 due to some unknown reasons, he demolished the house and constructed a house on the same lot. The house was completed in 2014 and decided not to stay in the same house. He sold the house in 2014 at a gain of $547,000. He excluded gain of $500,000 (exclusion allowed for MFJ) and paid capital gain on $47,000. He was audited for 2014 and the IRS had a different idea.

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Charlie and his wife lived in the house for the last 15 years. In 2013 due to some unknown reasons, he demolished the house and constructed a house on the same lot. The house was completed in 2014 and decided not to stay in the same house. He sold the house in 2014 at a gain of $547,000. He excluded gain of $500,000 (exclusion allowed for MFJ) and paid capital gain on $47,000. He was audited for 2014 and the IRS had a different idea.
Transcribed Image Text:Charlie and his wife lived in the house for the last 15 years. In 2013 due to some unknown reasons, he demolished the house and constructed a house on the same lot. The house was completed in 2014 and decided not to stay in the same house. He sold the house in 2014 at a gain of $547,000. He excluded gain of $500,000 (exclusion allowed for MFJ) and paid capital gain on $47,000. He was audited for 2014 and the IRS had a different idea.
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