Katrina, age 58, rented (as a tenant) the house that was her principal residence from January 1, 2019 through December 31, 2020. She purchased the house on January 1, 2021, for $150,000 and continued to occupy it through June 30, 2022. She leased it to a tenant from July 1, 2022, through December 31, 2023. On January 1, 2023, she sells the house for $350,000. She incurs a realtor’s commission of $20,000. (1) Calculate her recognized gain if her objective is to minimize the recognition of gain and she does not intend to acquire another residence. (2) Explain your answer.
Katrina, age 58, rented (as a tenant) the house that was her principal residence from January 1, 2019 through December 31, 2020. She purchased the house on January 1, 2021, for $150,000 and continued to occupy it through June 30, 2022. She leased it to a tenant from July 1, 2022, through December 31, 2023. On January 1, 2023, she sells the house for $350,000. She incurs a realtor’s commission of $20,000. (1) Calculate her recognized gain if her objective is to minimize the recognition of gain and she does not intend to acquire another residence. (2) Explain your answer.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Katrina, age 58, rented (as a tenant) the house that was her principal residence from January 1, 2019 through December 31, 2020. She purchased the house on January 1, 2021, for $150,000 and continued to occupy it through June 30, 2022. She leased it to a tenant from July 1, 2022, through December 31, 2023. On January 1, 2023, she sells the house for $350,000. She incurs a realtor’s commission of $20,000. (1) Calculate her recognized gain if her objective is to minimize the recognition of gain and she does not intend to acquire another residence. (2) Explain your answer.
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