What is the tax treatment of the sale of her home

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Q1. Tina purchased a house for $240,000 to use as her principal residence. After living in the home for 3 years, Tina sold it for $400,000. What is the tax treatment of the sale of her home?

a. A $0 gain is realized and recognized

b. A $400,000 gain is realized and recognized

c. A $160,000 gain is realized and $0 is recognized

d. A $160,000 gain is realized and recognized

Q2. Mike sold equipment for $500,000. The equipment was purchased for $300,000 and had accumulated depreciation of $125,000. What amount is reported as ordinary income under Code Sec. 1245?

a. $0

b. $125,000

c. $150,000

d. $325,000

Reference no: EM133085795

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