Real Estate Math
A NJ homeowner who bought a property for $280,000, sold it for $450,000, and excluded $250,000 of capital gain under Section 121 (primary residence exclusion) pays capital gains tax on:
AThe full $170,000 gain
B$170,000 – $250,000 exclusion = $0 (the entire gain is excluded since the gain is only $170,000 which is less than the $250,000 exclusion)✓ Correct
C$250,000
D$450,000
Explanation
Capital gain = $450,000 – $280,000 = $170,000. The single-filer Section 121 exclusion is up to $250,000. Since the gain ($170,000) is less than the maximum exclusion ($250,000), the entire $170,000 gain is excluded and no capital gains tax is owed.
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