Question

Michael sold his house for $330,000 and had $33,000 in closing costs. His beginning basis was $187,000 and he spent $68,000 on capital improvements. What is Michael's capital gain for tax purposes? (assume he doesn't qualify for an exclusion)

Answer 1

Answer:

Michael's capital gain for tax purposes is $42,000.

Explanation:

Given:

Michael sold his house for $330,000 and had $33,000 in closing costs. His beginning basis was $187,000 and he spent $68,000 on capital improvements.

Now, to find the Michael's capital gain for tax purposes.

Sale price of house = $330,000.

Closing costs = $33,000.

Beginning basis = $187,000.

Capital improvements = $68,000.

Now, to get the Michael's capital gain for tax purposes subtract the closing costs, beginning basis and capital improvements from the sale price of house:

$330,000-(33,000+187,000+68,000)\\\\=330,000-288,000\\\\=\ 42,000.$

Therefore, Michael's capital gain for tax purposes is $42,000.