Question:

2. Steve Pratt, who is single, purchased a home in Spokane, Washington, for $615,000. He moved into the home on February 1 of year 1. He lived in the home as his primary residence until June 30 of year 5, when he sold the home for $912,500.

a. What amount of gain will Steve be required to recognize on the sale of the home?

b. Assume the original facts, except that the home is Steve's vacation home and he vacations there four months each year. Steve does not ever rent the home to others. What gain must Steve recognize on the home sale?

c. Assume the original facts, except that Steve married Stephanie on February 1 of year 3 and the couple lived in the home until they sold it in June of year 5. Under state law, Steve owned the home by himself. How much gain must Steve and Stephanie recognize on the sale (assume they file a joint return in year 5).

5. In year 1, Peter and Shaline Johnsen moved into a home in a new subdivision. Theirs was one of the first homes in the subdivision. In year 1, they paid $4,100 in real property taxes to the state government, $1,200 to the developer of the subdivision for an assessment to pay for the sidewalks, and $890 for real property taxes on land they hold as an investment. What amount of property taxes are the Johnsens allowed to deduct assuming their itemized deductions exceed the standard deduction amount before considering any property tax deductions?

Answer rating: 100% (QA)

Answer to 2 a Since Steve Pratt has moved into the home in Spokane Washington on February 1 of year1 ... View the full answer