Wesley, who is single, listed his personal residence with a real estate agent on March 3, 2017, at a price of $390,000. He rejected several offers in the $350,000 range during the summer. Finally, on August 16, 2017, he and the purchaser signed a contract to sell for $363,000. The sale (i.e., closing) took place on September 7, 2017. The closing statement showed the following disbursements: Real estate agent's commission Appraisal fee Exterminator's certificate Recording fees Mortgage to First Bank Cash to seller $21,780 600 300 800 305,000 34,520 Wesley's adjusted basis for the house is $200,000. He owned and occupied the house for seven years. On October 1, 2017, Wesley purchases another residence for $325,000. If an amount is zero, enter "O" a. Wesley's recognized gain on the sale is b. Wesley's adjusted basis for the new residence is c.Assume instead that the selling price is $800,000. Wesley's recognized gain is ,and his adjusted basis for the new residence is

Assume instead that the selling price is $800,000. Wesley's recognized gain is $326,520, and his adjusted basis for the new residence is $325,000.

How do we compute these gains and basis?

Wesley's actual gain:

= $363,000 - $21,780 - $600 - $300 - $800 - $200,000

= $139,520.

So, Wesley's actual gain is $139,520 but it can all be excluded using section 121.

Now, If the selling price is $800,000; Wesley's actual gain:

= $800,000 - $21,780 - $600 - $300 - $800 - $200,000

= $576,520.

So, Wesley's actual gain is $576,520 but he can exclude $250,000, so his recognized gain is $326,520.