Question - On January 15, 2010, Kelly, a 48-year-old widow, buys a new residence for $280,000. On the same day, she sells her old residence (adjusted basis of $110,000) for $297,000. Real estate commissions and legal fees total $20,000. She purchased the old residence on February 15, 2008, and occupied it is her principal residence from that date until January 15, 2010. Between April 1 and June 30, 2010, she constructs an addition to her new house at a cost of $20,000.
a) What is Kelly's realized gain or loss?
b) Kelly's recognized gain or loss?
c) Kelly's basis for the new residence?
d) Under part(b), what could Kelly have done to produce a better tax result?