Question

This year, Barney and Betty sold their home (sales price $570,000; cost $156,000). All closing costs were paid by the buyer. Barney and Betty owned and lived in their home for 18 months. Assuming no unusual or hardship circumstances apply, how much of the gain is included in gross income?

Multiple Choice

None of the choices are correct.

$208,000.

$34,000.

Incorrect

$190,000.

$414,000.

Answer 1

The answer is: None of the choices are correct.

Step-by-step explanation:

In order for Barney and Betty to qualify for a tax break on the money they made by selling the house ($570,000 - $156,000 = $414,000) they should have lived and owned that house for at least two years, if not consecutively, they can include time owned and lived during the last five years.

If they are married and file a joint return they could have requested a $500,000 tax break, if they filed separately then only $250,000.

Also, the income the made from the house ($414,000) counts as capital gains, not gross income.