Final answer:
The amount realized from the sale of a property includes the cash received, the fair market value of any other property received, and the liabilities assumed by the buyer. Accumulated depreciation is not directly included. This concept also applies to the amount realized from loans, where interest earned is part of the total realization from the investment.
Step-by-step explanation:
The amount realized from the sale of a property includes several factors. Specifically, the amount realized can be calculated by summing the cash received, the fair market value of any other property received, and the amount of any liabilities assumed by the buyer. Accumulated depreciation is a tax concept relevant to the basis of an asset and does not directly factor into the calculation of the amount realized.
For example, if Freda sells her house that she bought for $150,000 and it now sells for $250,000, the amount realized would be $250,000 assuming no other property is received and no liabilities are assumed by the buyer. Similarly, if Frank sells his house valued at $160,000 and the buyer assumes the remaining mortgage balance, the amount realized would include that balance.
In the context of loans, the amount of interest on a loan gives us another application. The interest earned from a loan can be considered as part of the amount realized from the investment in the loan. If the loan was for $10,000 at a simple interest rate for a given period, the interest received would contribute to the amount realized by the lender.