What is Barbaras cost basis for the personal residence?
PERSONAL AND FINANCIAL OBJECTIVES Barbara wants to have sufficient income ($40000 per year in today Show more PERSONAL AND FINANCIAL OBJECTIVES Barbara wants to have sufficient income ($40000 per year in todays dollars including any Social Security benefits). Barbara will consider acquiring a smaller residence Barbara wants to explore long-term nursing home care alternatives (annual cost of a nursing home in todays dollars $40000). You will have to assume a cost of long term care premiums. Barbara wants to donate to the American Cancer Society. Barbara wants to provide for her children and grandchildren. Barbara wants to pay Sarahs tuition ($15000). Barbara wants to gift stock to Richard ($13000) Barbara wants to pay for Richards orthodontic work ($6000). Barbara wants to send Sarah to Europe ($3000). ECONOMIC INFORMATION Inflation is expected to be 4% annually. There is no state income tax. A slow growth economy is expected and stocks are expected to grow at 9.5%. Bank lending rates are as follows: 15-year mortgages 6.5% 30-year mortgages 7.5% Secured personal loan 10.0% Life Expectancies from MDIB Table: AGE LIFE EXPECTANCY FACTOR 7026.2 7125.3 7224.4 INSURANCE INFORMATION Life Insurance Irrevocable Life Insurance Trust (ILIT) Andrew created an ILIT 10 years ago. The only asset in the trust is a permanent life policy with a face value of $200000. The income beneficiary of the ILIT is Barbara. She is also the trustee and has a general power of appointment over the trust assets. The remainder beneficiaries are the grandchildren. Health Insurance Andrew and Barbara were both covered under Medicare Part A. INVESTMENT INFORMATION Barbaras investment risk tolerance is low. INCOME TAX INFORMATION The Lanes filed as married filing jointly for 2011. Barbara and Andrew have always lived in a community property state. FINANCIAL DATA Credit card debt* $20000 Cash 25000 Primary residence** 400000 Auto 18000 Savings accounts 20000 Stocks 20000 IRA 50000 Pension 150000 Furniture 77000 Vacation home*** 200000 *All liabilities are community property **Primary residence originally purchased for $110000 ***Inherited from Barbaras mother. Adjusted taxable basis is $125000 Question: Barbara is considering selling her personal residence. What is Barbaras cost basis for the personal residence? Show less
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