Real Estate Math
A New Mexico seller receives $340,000 for their property. Their original basis is $175,000 plus $40,000 in improvements. What is the capital gain before exclusions?
A$90,000
B$125,000✓ Correct
C$165,000
D$175,000
Explanation
Adjusted basis = $175,000 + $40,000 = $215,000. Capital gain = $340,000 - $215,000 = $125,000. Using the values given ($340,000, $175,000), apply the appropriate formula.. The correct answer is $125,000.. This is a common calculation on the New Mexico real estate exam.
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