Question

For the scenario described (d. $0), what is the recognized loss for Dillon when the sale proceeds are $6,500 and the loss basis is $7,000?

A) $500
B) $0
C) $6,500
D) $7,000

Answer 1

The recognized loss for Dillon when the sale proceeds are $6,500 and the loss basis is $7,000 is calculated by subtracting the sale proceeds from the loss basis, yielding a recognized loss of $500.

Thus, the correct option is A.

Step-by-step explanation:

When the sale proceeds are less than the loss basis, a recognized loss is calculated. In this scenario, the sale proceeds are $6,500 and the loss basis is $7,000. To determine the recognized loss, subtract the sale proceeds from the loss basis.

Recognized Loss = Loss Basis - Sale Proceeds

Recognized Loss = $7,000 - $6,500 = $500

Therefore, the recognized loss for Dillon is $500.

Therefore, the answer to the student's question is A) $500. This is the recognized loss for Dillon given the scenario described.