Mr. McNeal believes that the real estate market is overpriced, and that correction is imminent. Therefore, he decided to sell his cottage, which he owned since 2000 and acquired at a coat of $850,000, along with his condominium, which he acquired in 2008 at a cost of $625,000. The cottage was sold for $1,200,00 in June 2019, and the condominium sold in July 2019 for $900,000. Real estate commissions of 5% of the sales price were charged on both transactions. Mr. McNeal has been the only individual to use these properties, and either one could be designated as the principal residence for the relevant years. Mr. McNeal wishes to minimize any capital gains resulting from the sale of the two properties.

Describe hoe the residences should be designated in order to accomplish Mr. McNeal's goals. In addition, calculate the amount of the gain that would arise under the designation that you have recommended.

Answer rating: 100% (QA)

To minimize capital gains resulting from the sale of the two properties Mr McNeal should designate t... View the full answer