Question

This year, Fred and Wilma sold their home (sales price $750,000; cost $200,000). All closing costs were paid by the buyer. Fred and Wilma owned and lived in their home for 20 years. How much of the gain is included in gross income?

A. $550,000
B. $300,000
C. $250,000
D. $50,000
E. None

Answer 1

The taxable gain for the sale of Fred and Wilma's home is $550,000.

Step-by-step explanation:

To determine the amount of gain included in gross income, we need to calculate the taxable gain. The taxable gain is the sales price minus the cost basis, which is the original cost plus any improvements. In this case, the sales price is $750,000 and the cost basis is $200,000, so the taxable gain is $550,000.

Therefore, the correct answer is A. $550,000.