ExpertMedium1 markMultiple Choice
CPA · Question 62 · Area IV: Property Transactions
A taxpayer sells their principal residence for a $400,000 gain. They are single and lived in the home for 18 months due to a job change (qualified unforeseen circumstance). The maximum exclusion is $250,000. What is the exclusion amount?
A taxpayer sells their principal residence for a $400,000 gain. They are single and lived in the home for 18 months due to a job change (qualified unforeseen circumstance). The maximum exclusion is $250,000. What is the exclusion amount?
Answer options:
A.
$0
B.
$187,500
C.
$250,000
D.
$400,000
How to approach this question
Partial Exclusion: (Months Qualified / 24) * Max Exclusion. 18/24 * $250k = $187,500.
Full Answer
B.$187,500✓ Correct
B
IRC §121(c). The taxpayer gets a partial exclusion because the sale was due to a change in employment. 18/24ths of the $250,000 exclusion is allowed.
Common mistakes
Denying exclusion entirely; applying percentage to the gain instead of the limit (though here gain > limit, so result is limit).
Practice the full CPA TCP Practice Exam 5
68 questions · hints · full answers · grading
More questions from this exam
Q01In Year 1, an executive is granted an Incentive Stock Option (ISO) to purchase 1,000 shares of co...MediumQ02A taxpayer has a $500,000 interest-free loan from their employer outstanding for the entire Year ...MediumQ03A taxpayer wants to donate stock held for 5 years to a public charity. The stock has an adjusted ...MediumQ04An individual taxpayer had an AGI of $160,000 in Year 1 and a tax liability of $30,000. In Year 2...MediumQ05A taxpayer invests $50,000 cash for a 20% interest in a partnership. The partnership takes out a ...Hard