Sale of Principal Residence

Mary and Joe are married filing jointly in $2023.$ As Megan received a great job offer from a company in Candon, North Carolina, they decided to accept the offer and moved to Candon.

Thus, they decided to list their home in Spokane, WA for sale. Joe and Mary purchased and closed this home on January $5$th$,2018,$ two months after their marriage. They put down a down payment of $100,000,$ and took out a mortgage of $200,000$ to purchase the home. They used it as principal residence

in $2018.$ Joe was relocated to Paris for two years. Since Mary always dreamt about living in Paris, she moved to Paris with Joe in $2019$ and $2020.$ They moved back on January $1$st$,2021,$ and lived in their home ever since. When they were in Paris, they rented out the home for $$2,200$ a month $($a total of $22$ months as a rental$),$ and tenants paid for maintenance and all utilities. A total depreciation of $$13,000$

has been taken while used as a rental. Mary and Joe invested the following in the home after they came back from Paris so that they can enjoy their lovely home again:

Whole house painting $($interior and exterior$)$: $$12,000$

Luxury vinyl planking $($material and labor paid to the contractor$)$: $ $14,000$

Remodel of the two bathrooms and kitchen: $$60,000$

Repair of furnace and some leakage in the pipes: $$5,000$

Yard cleaning up and trimming: $$2,000$

Property taxes owed from previous years: $$7,800$

Deep house cleaning: $$800$

Mary and Joe found a great realtor and listed their home for sale in October $2023.$ The realtor suggested to them that due to a buyer's market, it is better for them to spruce up their home a bit to attract more potential buyers. After living there for a couple of years after the major renovation, the house needs some TLC to look perfect for the sale. Thus, Mary and Joe spent the following before listing their home for sale:

Painting of the living room and baby's room due to doodling: $ $4,400$

Decluttering and garbage service: $$1,500$

Repair of clogging and some wiring issues: $ $3,000$

Yard service: $$1,200$

Deep house cleaning: $$900$

They managed to sell the home after three weeks on market at a sale price of $$850,000.$ The house is closed on November $30$th$,2023.$ The selling cost is $7$ percent of the sale price. Mary and Joe are anxious to know the tax consequences of this sale, and engaged you as their tax consultant. Write a letter to Mary and Joe in which you respond to their inquiry and prepare a memo for the tax files.

Their home address is $12366$th Ave, Spokane, WA $88768.$