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The amount realized also includes any liability on the property disposed of, such as a mortgage debt, if the buyer assumes the mortgage or the property is sold subject to the mortgage. a) True

b) False

1 Answer

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Final answer:

The statement is true. The amount realized from the sale of property does include any liability such as a mortgage debt that is transferred to the buyer.

Step-by-step explanation:

The statement that the amount realized from the disposition of a property includes any liability, such as a mortgage debt, if the buyer assumes the mortgage or the property is sold subject to the mortgage, is true. When calculating the amount realized from a sale, the seller must include the value of the property plus any debt transferred to the buyer. For example, if Freda sells her house valued at $250,000 with no mortgage, her amount realized is $250,000. However, if Frank sells his house valued at $160,000 and the buyer assumes Frank's remaining mortgage debt of $60,000, the amount realized would be $220,000 (the sum of the home value and the assumed debt).

User Asanga Dewaguru
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