Question

Donald and Candice sell their home for $695,000, incurring selling expenses of $30,000. They purchased the residence for $125,000 and made capital improvements totaling $20,000 during the 20 years they lived there.

What is their realized gain and recognized gain on the sale?

Answer 1

Answer: Recognised gain is $520,000

Realised gain is $570,000

Explanation: Recognised gain is the difference in the cost of an asset and the sales price of an asset also putting into record of expenses incurred on the asset. from the question, recognised gain is $695,000 less $125,000 less $30,000 less $20,000 = $520,000

Realised gain is the actual difference between the actual cost of an asset and the actual sales price of the asset. from the question, cost price is $125,000 and sales price is $695,000. the realised gain is $570,000