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Property Tax Exclusions and Gains

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3. Mathew Murphy, single, sold his home that he had owned for 20 years for $670,000. He purchased it for $110,000 and made $40,000 of capital improvements on the home during his time of ownership.

(a) How much gain is excluded? How much is recognized?
(b) If Mathew purchased another home for $420,000, how much is excluded and recognized?

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Solution Summary

This solution discusses the federal capital gain exclusion from selling one's principal residence and illustrates how to compute it and how it applies if they buy another home.

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(a) Mathew's adjusted basis in the home is the sum of the $110,000 for its purchase and the $40,000 of capital improvements, or ...

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