In 1996, Mr. and Mrs. Sellers purchased their first principal residence for $100,000. In 2000, they spent $50,000 to add a room to the house. In 2010, the entire residence was painted at a cost of $8,000. They have spent about $25,000 in routine maintenance and repairs since acquiring the home. Determine the following:
1. Calculate the basis of the property
2. Calculate the amount of recognized gain or loss if the home was sold today for $900,000
3. Calculate the amount of recognized gain or loss if the home was sold today for $500,000.
4. Calculate the amount of recognized gain or loss if the home was sold today for $100,000.
5. Explain the tax considerations that Mr. and Mrs. Sellers must consider if they decided to convert the residence in to a rental property.