Amanda and Earl are married and live in Texas. Amandas parents are very wealthy and...
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Amanda and Earl are married and live in Texas. Amandas parents are very wealthy and have given her significant amounts of money. Amanda owns a rental home that her parents gave to her. Her parents paid $200,000 for the house and gifted it to Amanda when it was worth $250,000. Earl comes from a poor family and has worked very hard to get where he is today. He has a great job and makes a comfortable living.
In 2022, Earl and Amanda had the following transactions:
- Amandas rental home earned $20,000 in rental income. The house value also increased by $100,000 due to the crazy real estate market.
- Amandas parents gave her an additional $50,000 as a gift. Earl earned $120,000 in salary.
- They sold their principal residence for $850,000. They had purchased their home five years ago using money they earned during marriage for $300,000.
Amanda and Earl file a joint income tax return. Please determine how much income Amanda and Earl will report on their return.
Please explain answers.
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