McGraw-Hill's Taxation of Individuals and Business Entities 3rd Edition by Brian Spilker, Benjamin Ayers, John Robinson, Edmund Outslay, Ronald Worsham, John Barrick, Connie Weaver

Exercise 37

Steve and Stephanie Pratt purchased a home in Spokane, Washington for $400,000.They moved into the home on February 1 of year 1.They lived in the home as their primary residence until June 30 of year 5, when they sold the home for $700,000.?
a.What amount of gain on the sale of the home are the Pratts required to include in taxable income?
b.Assume the original facts, except that Steve and Stephanie lived in the home until January 1 of year 3 when they purchased a new home and rented the original home.They finally sell the original home on June 30 of year 5 for $700,000.Ignoring any issues relating to depreciation taken on the home while it was being rented, what amount of realized gain on the sale of the home are the Pratts required to include in taxable income?
c.Assume the same facts as in (b), except that the Pratts lived in the home until January of year 4 when they purchased a new home and rented the first home.What amount of realized gain on the sale of the home will the Pratts include in taxable income if they sell the first home on June 30 of year 5 for $700,000?
d.Assume the original facts, except that stephanie moved in with steve on March 1 of year 3 and the couple was married on March 1 of year 4.Under were married.On December 1 of year 3, Stephanie sold her home that she lived in before she moved in with Steve.She excluded the entire $50,000 gain on the sale on her individual year 3 tax return.What amount of gain must the couple recognize on hte sale in June of year 5?