Steve Pratt, who is single, purchased a home in Riverside, California, for $400,000. He moved into the home on February 1of year 1. He lived in the home as his primary residence until June 30 of year 5, when he sold the home for $700,000.Note: Leave no answer blank. Enter zero if applicable.c. Assume the original facts, except that Steve married Giuseppina on February 1 of year 3 and the couple lived in the home until theysold it in June of year 5. Under state law, Steve owned the home by himself. How much gain must Steve and Giuseppina recognize onthe sale (assume they file a joint return in year 5)?Recognized gain on sale

When selling a home, tax considerations arise based on the gain realized. If a property was used as…

Answered: Recognized gain on sale

Business

Accounting

Recognized gain on sale

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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Concept explainers

Capital Gain

Any capital asset when sold can give the seller a higher or lower price from its purchase price leading to a capital gain or capital loss. The time period of holding an asset is decided based on if it is a long term or short-term capital gain. On that basis, the rate of taxation is decided if it is 20%, 15% or according to the tax brackets. The rate of taxation differs in the case of equity or debt, whether long or short term. The capital gain can be adjusted from capital loss to arrive at a net capital gain. The amount of gains and the exemption has to be reported in the tax return filed in the financial year in which the asset was transferred. The tax return can be filed quarterly, monthly, semi-annually or annually.

Question

Steve Pratt, who is single, purchased a home in Riverside, California, for $400,000. He moved into the home on February 1
of year 1. He lived in the home as his primary residence until June 30 of year 5, when he sold the home for $700,000.
Note: Leave no answer blank. Enter zero if applicable.
c. Assume the original facts, except that Steve married Giuseppina on February 1 of year 3 and the couple lived in the home until they
sold it in June of year 5. Under state law, Steve owned the home by himself. How much gain must Steve and Giuseppina recognize on
the sale (assume they file a joint return in year 5)?
Recognized gain on sale

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