Clark and Lois realized a profit from selling their home. What amount of capital gains tax do they owe if they sold it for $500,000?

The correct choice indicates that Clark and Lois owe $0 in capital gains tax because of the capital gains tax exemption available to homeowners. In the United States, individuals can exclude up to $250,000 of capital gains from the sale of their primary residence, and married couples filing jointly can exclude up to $500,000.

If Clark and Lois are a married couple and have met the ownership and use tests—meaning they have lived in the home as their primary residence for at least two out of the five years preceding the sale—they can fully utilize the $500,000 exclusion. This means that if their profits fall under this exclusion limit, they will not owe any capital gains tax on their sale.

The amount they sold their home for, $500,000, does not directly affect their capital gains tax liability unless it's compared to their adjusted basis (the original purchase price plus any capital improvements) to determine the actual gain. If their adjusted basis is low enough that their gain is entirely within the exclusion, they would owe no taxes, leading to the correct answer of $0.