In 1996, Mr. and Mrs. Sellers purchased their first principal residence for $100,000. In 2000, they spent $50,000 to add a room to the house. In 2010, the entire residence was painted at a cost of $8,000. They have spent about $25,000 in routine maintenance and repairs since acquiring the home. Determine the following:
1. Calculate the basis of the property
2. Calculate the amount of recognized gain or loss if the home was sold today for $900,000
3. Calculate the amount of recognized gain or loss if the home was sold today for $500,000.
4. Calculate the amount of recognized gain or loss if the home was sold today for $100,000.
5. Explain the tax considerations that Mr. and Mrs. Sellers must consider if they decided to convert the residence in to a rental property.
Requirements:
Clearly identify the requirements being addressed. Show all calculations within the cells of an Excel spreadsheet. This means that you must use formulas and links so that the thought process can be examined. Make good use of comments to convey your thought process as well.