A real estate investor owns a rental property that they purchased 5 years ago for $300,000 and sells for $450,000. What portion of the $150,000 capital gain is subject to income tax?
Correct Answer
B) $75,000
For investment properties, 50% of the capital gain is included in taxable income. Therefore, 50% of the $150,000 gain equals $75,000 that must be added to the investor's income for tax purposes. Investment properties do not qualify for the principal residence exemption.
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