Question

1. Realized gain or loss is measured by the difference between the amount realized from the sale or other disposition of property and the property’s adjusted basis at the date of disposition.

1. True

2. False

2. If WalMart stock increases in value during the tax year by $6,000, the amount realized is a positive $6,000.

1. True

2. False

3. The fair market value of property received in a sale or other disposition is the price at which property

will change ands between a willing seller and a willing buyer when neither is compelled to

sell or buy.

a. True

b. False

4. Expenditures made for ordinary repairs and maintenance of property are not added to the original basis in the determination of the property’s adjusted basis whereas capital expenditures are

added to the original basis.

a. True

b. False

Answer 1

1- This statement is TRUE.

Realized gain or loss is calculated by the difference between the amount realized from the sale or other disposition of property and the property's adjusted basis at the date of disposition

Simply,

Realized gain or loss = Sale value minus book value or carrying value at the date of sale or disposal of property.

2- This statement is FALSE.

If Walmart stock increases in value during the tax year by $6,000, the amount realized is a positive $6,000. This is a false statement. The amount realized is not a positive $6,000 for an increase of stock by $6,000 during the year.

3- This statement is TRUE.

The fair market value of property received in a sale or any other mode of disposition is the price at which the property will change hands between a willing seller and a willing buyer when neither is compelled to sell or buy the property..

4- This statement is TRUE.

Expenditure made for ordinary repair and Maintenance of property are not added to the original cost, as these costs are revenue expenses, revenue expenses are to be expended in which year it incurred. Only capital expenditures are added to the cost of assets or property.