Webb, who is single, listed his personal residence with a real estate agent on March 3, 2012, at a price of $350,000. He rejected several offers in the $300,000 range during the summer. Finally, on August 16, 2012, he and the purchaser signed a contract to sell for $342,000. The sale (i.e., closing) took place on September 7, 2012. The closing statement showed the following disbursements:
|
Real estate agent’s commission |
$ 21,000 |
|
Appraisal fee |
750 |
|
Exterminator’s certificate |
300 |
|
Recording fees |
500 |
|
Mortgage to First Bank |
205,000 |
|
Cash to seller |
114,450 |
Webb’s adjusted basis for the house is $175,000. He owned and occupied the house for six years. On October 1, 2012, Webb purchases another residence for $270,000.
a. Calculate Webb’s recognized gain on the sale.
b. What is Webb’s adjusted basis for the new residence?
c. Assume instead that the selling price is $735,000. What is Webb’s recognized gain? His adjusted basis for the new residence?