Question

15) & 16) Mark tranfers equipment to XYZ Corporation. Details are: Fair market value = $75,000 Adjusted basis = $20,000 Mortgage = $30,000 Mark receives the following XYZ Corporation: Stock, fair market value = $45,000 Assumption of John's $30,000 mortgage Assume the transfer meets the requirements of IRC Sec 351:

15) Mark's realized gain is a $25,000 b $30,000 c $50,000 d $55,000

16) Mark's recognized gain is a $10,000 b $25,000 c $50,000 d $55,000

Answer 1

Amount realized is the amount received from the sale of an asset. The amount realized encompasses all forms of compensation, including cash, the fair market value of any property received, and any liabilities that the purchaser assumes as a result of the transaction.

The amount realized does not include transaction costs such as commissions and other related fees. The term realized income is different than amount realized. Realized income is money you receive for goods or services.

Understanding Amount Realized

The amount realized is used to calculate realized gains and losses. To calculate a realized gain or loss, take the difference of the total consideration given and subtract the cost basis. If the difference is positive, it is a realized gain. If the difference is negative, it is a realized loss.

Amount realized is different from amount recognized, which is defined as taxable income received or a deductible loss.

Example of an Amount Realized Calculation

The total consideration will also include any liabilities assumed, as in this example:

Suppose you have sold a property that has an outstanding mortgage of $75,000. The buyer pays you $40,000 and assumes the mortgage. In this case, you would have realized a total gain of $115,000 ($40,000 payment + $75,000 mortgage transferred).

15)Realised gain =Marks trf realised gain -marks recived realised gain

=(75000+30000) $-(45000+30000) $

=30000 $

When you sell your property, the amount realized is the sales price you receive with any selling costs you paid deducted; and the amount recognized is the amount realized minus your adjusted basis in the property. Your adjusted basis is the original purchase price plus the costs of any improvements you made.1

The amount realized when you render services for sale is the compensation you receive for your services minus any marketing expenses you incurred to land the client.1

In general, the amount recognized is the amount realized minus business costs incurred to render the services

16) amount recognised= Fair markt value- adjusted loss

=75000 $-20000 $

=55000 $

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