1. Norma drives a Toyota Camry as her personal car. She bought the car for $10,000...
1. Norma drives a Toyota Camry as her personal car. She bought the car for $10,000 ten years ago and the current fair market value is $7,000. Calculate the realized and recognized gain or loss if Norma sells the car this year to Miriam for $11,000.
Homework Answers
Solution:
Norma has realized gain of $ 1,000 ( $11,000 - $10,000 )on the personal car.
Reason:
1) Norma has used the Toyota Camry as her personal car and this gives an information that there is no adjustment made to the car such as depreciation etc ( because it is used for personal use)
2) Fair Market Value would not be considered here.
3) There is only realized gain but no recognized gain because we have actually received the cash for the transaction.
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