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With a selling price of $850,000, there is a $300,000 realized gain. However, as a single taxpayer, Tina can exclude $250,000. She can count the time they owned it when they were married. Therefore, she must recognize $50,000 gain. Sale of Residence: Divorced Taxpayers25. a. Thomas can exclude the $120,000 gain since he can count the time that Tonya owned the residence which makes the ownership and use more than two years. b. Tonya can exclude the $120,000 gain since she can count the time that Thomas used the residence as part of the divorce agreement. Sale of Residence: Incapacitated Taxpayers26. Arnold can exclude the $85,000 gain ($245,000 less $160,000) because he has used the residence at least one year during the preceding five years. Sale of Residence: Involuntary Conversion27. a. Oscar does not recognize any of the $230,000 realized gain on the involuntary conversion of his home by the tornado because it is less than the $250,000 exclusion allowed for a single individual. b. Oscar has a realized gain of $355,000 ($525,000 less $170,000). He may exclude $250,000 and would have to recognize $105,000 gain. If, however, he purchased a home for $275,000 or more, he could defer the remaining $105,000 of realized gain. The $525,000 would be reduced by the $250,000 gain excluded leaving $275,000 of proceeds to be used when applying the gain deferral provision under the involuntary conversion rules of Code Sec. 1033.