Question

Does each of the following scenarios result in a recognized gain or loss, and how much is the gain or loss?

a. Kay sells her vacation cabin (adjusted basis of $100,000) for $150,000.
The recognized SelectgainlossCorrect 1 of Item 1 is $.

b. Adam sells his personal residence (adjusted basis of $150,000) for $100,000.
There is a realized SelectlossgainCorrect 1 of Item 2 of $ that Selectis not deductibleis deductibleis taxableCorrect 3 of Item 2.

c. Carl's personal residence (adjusted basis of $65,000) is condemned by the city. He receives condemnation proceeds of $55,000.
There is Selecta recognized lossan unrecognized lossCorrect 1 of Item 3 of $.

d. Olga's land is worth $40,000 at the end of the year. She had purchased the land six months earlier for $25,000.
In this case, there is Selecta recognized gaina recognized lossno gain or lossCorrect 1 of Item 4.

e. Vera's personal vehicle (adjusted basis of $22,000) is stolen. She receives $23,000 from the insurance company and does not plan to replace the automobile.
The recognized SelectgainlossCorrect 1 of Item 5 is $.

f. Jerry sells used clothing (adjusted basis of $500) to a thrift store for $50.
There is Selecta recognized lossan unrecognized lossCorrect 1 of Item 6 of $.

Answer 1

Answer: (a) The gain recognize is $50,000 (b)The loss recognize is $50,000 (c) The loss recognize is $10,000 (d) The gain recognize is $15,000 (e) The gain recognize is $1,000 (f) The loss recognize is $450

Explanation:

Adjusted basis is used to calculate the gain or loss realised from the sale of an asset. When it is calculated if the amount is positive it is a gain, but if the amount is negative it is a loss. It is calculated as Amount realized - Adjusted basis = gain or loss.

Therefore in the following scenarios

(a) Amount realized =$150,000, Adjusted basis = $100,000

Amount realized - Adjusted basis

= $150,000 - $100,000 = $50,000

The gain recognized is $50,000

(b) Amount realized = $100,000, Adjusted basis = 150,000

Amount realized - Adjusted basis

= $100,000 - $150,000 = ($50,000)

The loss recognized is $50,000

(c) Amount realized = $55,000, Adjusted basis $65,000

Amount realized - Adjusted basis

= $55,000 - $65,000 = ($10,000)

The loss recognize is $10,000

(d) Amount realized - Adjusted basis

Amount realized $40,000, Adjusted basis = $25,000

Amount realized - Adjusted basis

$40,000 - $25,000 = $15,000

The gain recognize is $15,000

(e) Amount realized = $23,000, Adjusted basis =$22,000

Amount realized - Adjusted basis

= $23,000 - $22,000 = $1,000

The gain recognize is $1,000

(f) Amount realized = $50, Adjusted basis = $500

Amount realized - Adjusted basis

=$50 - $500 = ($450)

The loss recognize is $450