How much gain is recognized by walter on the sale of house

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Problem

Walter , a single taxpayer, sells a house that he owns on June 1, 2016 for $500,000. He purchased the house on January 1, 2008, for $220,000 and used the house as his personal residence until May 31, 2015. He allowed a friend to live in the house from June 1, 2015 til May 31, 2016. Unfortunately, a spat with a friend ended the "rent free" agreement. The house had an adjusted basis at the date of sale of $200,000. Walter used the sales proceeds to purchase a new house at a cost of $450,000.

How much gain is recognized by Walter on the sale of the house?

What is the basis of the new house purchased by Walter?

Reference no: EM131810377

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