Intuit Academy Tax Practice Exam 2025 – 400 Free Practice Questions to Pass the Exam

The correct answer identifies a significant tax benefit that homeowners can leverage when selling their primary residence. Under the Internal Revenue Code, individuals are allowed to exclude up to $250,000 of gain from the sale of their home if they are single filers. If the seller is married filing jointly, this exclusion can extend to $500,000. This provision is aimed at providing homeowners with a tax relief option, given that selling a house often generates substantial gains that could otherwise lead to a significant tax burden.

For the exclusion to apply, the seller must have owned and used the home as their primary residence for at least two out of the five years preceding the sale. This encourages homeownership and mobility without the added stress of capital gains taxes from rising property values.

Other options presented do not accurately reflect the rules regarding the exclusion of gain from the sale of a primary residence. For instance, the notion that all gains from the sale of a home are tax-exempt is misleading because the exclusion only applies under specific conditions, and gains exceeding the exclusion limit would be subject to taxation. Similarly, the requirement that gains must be less than $100,000 does not align with the actual regulation, and stating that only gains not exceeding the purchase price are excluded fails to