Question

Peyton sells an office building and the associated land on May 1, 2016. Under the terms of the sale contract, Peyton is to receive $1,600,000 in cash. The purchaser is to assume Peyton's mortgage of $950,000 on the property. To enable the purchaser to obtain adequate financing, Peyton is to pay the $9,000 in points charged by the lender. The broker's commission on the sale is $75,000. The purchaser agrees to pay the $24,000 in property taxes for the entire year. What is Peyton's amount realized?

Answer 1

Peyton's amount realized from selling the property is $2,490,000, which is calculated by summing the cash received, mortgage assumed by the purchaser, and property taxes paid by the purchaser, then subtracting the points paid and the broker's commission.

Step-by-step explanation:

To calculate Peyton's amount realized from the sale of the office building and land, we need to consider the cash received, the mortgage assumption, the points paid, the broker's commission, and the property taxes. Here's the calculation:

• Cash received: $1,600,000
• Mortgage assumed by the purchaser: $950,000
• Points paid by Peyton: -$9,000
• Broker's commission: -$75,000
• Property taxes paid for by the purchaser (which is a benefit to Peyton): +$24,000

The total amount realized is therefore the sum of these amounts:

$1,600,000 (Cash received) + $950,000 (Mortgage assumed) - $9,000 (Points) - $75,000 (Commission) + $24,000 (Property taxes) = $2,490,000.

Peyton's amount realized from the sale of the property is $2,490,000.