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Murray (age 68, single) just sold his home of 35 years so that he could relocate nearer his grandchildren. He realized a $400,000 capital gain on the home. How much of this gain will Murray have to pay taxes on?

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jepessoa

Answer:

$150,000

Explanation:

Murray can use the section 121 exclusion that reduces his capital gains by $250,000 (it would have been $500,000 if he was married), because he owned the house for 35 years (ownership test) and lived there for the past two years (use test).

Murray's taxable capital gains = $400,000 - $250,0000 = $150,000

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