Paula inherits a home on July 1, 2017 that had a basis in the hands of the decedent at death of $290,000 and a fair market value of $500,000 at the date of the decedent's death. She decides to sell her old principal residence, which she has owned and occupied for 9 years, with an adjusted basis of $125,000 and move into the inherited home. On September 16, 2017, she sells the old residence for
$600,000 . Paula incurs selling expenses of $30,000 and legal fees of $2,000 . She decides to add a pool, deck, pool house, and recreation room to the inherited home at a cost of $100,000 . These additions are completed and paid for on November 1, 2017 . What is her recognized gain on the sale of her old principal residence and her basis in the inherited home?
a. $0; $500,000.
b. $193,000; $600,000.
c. $443,000; $600,000.
d. $475,000; $600,000.
e. None of the above.
b
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