Required information [The following information applies to the questions displayed below.] Steve and Stephanie Pratt purchased a home in Spokane, Washington, for $400,000. They moved into the home on February 1 of year 1. They lived in the home as their primary residence until November 1 of year 1, when they sold the home for $500,000. The Pratts' marginal ordinary tax rate is 35 percent. (Leave no answer blank. Enter zero if applicable.) d. Assume the same facts as part (b), except that on December 1 of year 0 the Pratts sold their home in Spokane and excluded the $300,000 gain from income on their year 0 tax return. How much gain will the Pratts recognize on the sale of their Spokane home? Recognized gain on sale

The rule that prohibits taxpayers from claiming an exclusion more than once every two years does not apply to taxpayers who are selling homes under hardship circumstances. A change in employment qualifies as an unforeseen circumstance, so the Pratts won’t be disqualified from the exclusion. However, the maximum available exclusion must be reduced to reflect the amount of time the Pratts owned and used the Spokane home relative to the two-year ownership and use requirements as follows: =Maximum exclusion × number of months taxpayers met the use and ownership tests/24 months =$500,000 × 9 months/24 months =$187,500 The Pratt’s can exclude up to $187,500 of gain on the sale. Because they realized a gain of $100,000 ($500,000 – 400,000) they are able to exclude the entire gain from taxable income. Consequently, the Pratts are not required to pay any taxes on the gain on the sale of the home. Hence the answer is 0