Paul purchased a home for $250,000 and sold it for $350,000. How much of the gain will Paul have to include on his 2018 tax return? Purchased the Home January 1, 2010 Vacation Home January 1, 2010 through December 31, 2014 Principal Residence January 1, 2015 through December 31, 2017 Vacant January 1, 2018 through December 31, 2018 Sold the Home December 31, 2018

On June 30, 2019, Kelly sold property for 240,000 cash and a 960,000 note due on September 30, 2020. The note will also pay 6% interest, which is slightly higher than the Federal rate. Kellys cost of the property was 400,000. She is concerned that Congress may increase the tax rate that will apply when the note is collected. Kellys after-tax rate of return on investments is 6%. a. What can Kelly do to avoid the expected higher tax rate? b. Assuming that Kellys marginal combined Federal and state tax rate is 25% in 2019, how much would the tax rates need to increase to make the option identified in part (a) advisable?