Question

In an exchange Julio gave up his business-use real property FMV $95000 adj basis $45000 for a smaller piece of business use real propert FMG $80000 and $15000 cash. What is gain realized and recognized?

Answer 1

Here realized gain is $95,000 and recognized gain is $45,000.

Realized gains are increases in the value of an asset that has been sold. The realized gain from the sale of the asset may lead to an increased tax burden since realized gains from sales are typically taxable income.

Whereas recognized gains are those gains realized from a disposition of property is usually a recognized gain for tax purposes.

Adjusted basis here is the net cost of an asset after adjusting for various tax-related items.

Therefore it’s concluded that realized gain is $95,000 and recognized gain is $45,000.