Olessa, single and age 60, sells her home for $540,000 after living there for 20 years. Her adjusted basis in that home was $220,000 and she has an additional $10,000 of selling expenses. What is the maximum gain that Olessa must report in connection with the sale of her principal residence?

Net gain = $60,000

Explanation:

Given:

Sale value of house = $540,000

Adjusted value = $220,000

Selling expenses = $10,000

Computation of gross profit on the house:

Gross profit on sale = Sale value of house - Adjusted value - Selling expenses

Gross profit on sale = $540,000 - $220,000 - $10,000

Gross profit on sale = $310,000

Maximum limit on gain from sale of house = $250,000(Form number 1040, Schedule D)

Computation of net gain:

Net gain = $310,000 - $250,000

Net gain = $60,000

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answer; standing committee;