Hello and welcome to this session. This is Professor Farhad. In this session, we will be working on examples illustrating Section 121. The first example is number 28, or actually number 88. Here are the facts: Car purchased his residency on January 2nd, 2013 for 260 thousand. After having lived there during 2012 as a tenant under a lease with an option to buy. So he started living there as early as 2012, but he was not an owner. The contract was that he had the option to buy, but he lived there as a tenant. On August 1st, 2014, Car sells his residence for three hundred and fifteen thousand. On June 13th, he purchases a new residence for 370. Basically, on a timeline, this is 2012. He lived there as a tenant. The clause was that the contract was rent-to-buy. So he lived there for rent-to-buy, and he purchased it on January 2nd, so at the beginning of the year 2013. He sold it in 2014, sometime in August. So basically, he was technically an owner because he purchased it. He was technically an owner only during this period. Just to note the ownership level. The first question is, what is called the recognized gain and what is his basis in the new residence? So, what is his recognized gain? Well, how do you recognize gain? Well, we have to know the amount, the selling proceeds. He sold it for three hundred and fifteen thousand, so the proceeds or the amount realized were three hundred and fifteen thousand. Then, if there are any selling prices to deduct, we don't have any selling prices to deduct. Then, we have to deduct the adjusted basis. What was his adjusted basis? Right here, two hundred and sixty thousand. So, that's minus two hundred and...
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