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Practice CPA®CPA TCP Practice Exam 2Question 60

Easy1 markMultiple Choice

Area IV: Property TransactionsTCPIndividual TaxResidence Sale

CPA · Question 60 · Area IV: Property Transactions

A taxpayer sells their principal residence for a $600,000 gain. They are single and have lived there for 5 years. What is the taxable gain?

Answer options:

A.

$600,000

B.

$100,000

C.

$350,000

D.

$0

How to approach this question

Section 121 Exclusion: Single = $250k. MFJ = $500k. <br/>Gain $600k - Exclusion $250k = $350k.

Full Answer

C.$350,000✓ Correct

IRC §121. A taxpayer can exclude up to $250,000 ($500,000 if MFJ) of gain on the sale of a principal residence if ownership and use tests are met.

Common mistakes

Using the MFJ limit for a single filer.

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