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Constanza, who is single, sells her current personal residence (adjusted basis of $262,500) for $735,000. She has owned and lived in the house for 30 years. Her selling expenses are $36,750. What is Constanza’s realized and recognized gain? Constanza’s realized gain is $ and her recognized gain would be $ .

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Answer:

Realized gain $435,750

Recognized gain$ 185,750

Explanation:

Calculation for Constanza’s realized and recognized gain

The realized gain will be calculated as :

Amount realized $698,250

($735,000 − $36,750)

Less the Adjusted basis ($262,500)

Realized gain $435,750

Constanza’s Recognised gain

Realized gain $435,750

Less Section 121 exclusion ($250,000)

Recognized gain$ 185,750

Therefore Constanza’s realized gain is $435,750 and her recognized gain would be $186,750 .