Question

Susan owns a car that she uses exclusively for personal purposes. Its original cost was $26,000, and the fair market value is $12,000. She exchanges the car and $18,000 cash for a new car. If an amount is zero, enter "0".a. Calculate Susan's realized and recognized gain or loss. Susan's realized loss is s

Answer 1

Answer:

$22,000

Explanation:

The original cost of the car was : $26,000

The fair market value of the car was : $12,000

The car was bought at a price higher than its fair market value by :

$26000-$12000 = $14000

She exchanges the car for $18000 to get a new one;

The loss while selling the car is : $26000-$18000=$8000

Total loss realized is  : $14000 +$8000 = $22,000