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 42

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 November 1 of year 1 when they sold the home for $500,000.The Pratts' marginal ordinary tax rate is 35 percent
a.Assume that the Pratts sold their home and moved because they don't like their neighbors.How much gain will the Pratts recognize on their home sale? At what rate, if any, will the gain be taxed?
b.Assume the Pratts sell the home because Stephanie's employer transfers her to an office in Utah.How much gain will the Pratts recognize on their home sale?
c.Assume the same facts as in (b), except that the Pratts sell their home for $700,000.How much gain will the Pratts recognize on the home sale?
d.Assume the same facts as (b), except that on December 1 of year 0 the Pratts sold their home in Seattle and excluded the $300,000 gain from income on their year 0 tax return.How much gain will the Pratts recognize on the sale of their Spokane home?