Question

Regarding the amount realized from a sale or other disposition of property, which of the following statements is correct?

A) The amount realized is always determined by the sale price of the property.
B) The amount realized is not applicable if the property is not sold.
C) The amount realized is only relevant for real property.
D) The amount realized is a measure of the economic value received for property given up, regardless of whether the property is sold.

Answer 1

The amount realized from a sale or other disposition of property is a measure of the economic value received for property given up, regardless of whether the property is sold.

Step-by-step explanation:

The correct statement regarding the amount realized from a sale or other disposition of property is D) The amount realized is a measure of the economic value received for property given up, regardless of whether the property is sold.

According to the IRS, the amount realized is the sum of any money received plus the fair market value of any property or services received. It represents the total economic value received for giving up the property, whether it was sold or disposed of in another way.

For example, in the case of Freda who bought a house for $150,000 in cash, if she were to sell it now for $250,000, the amount realized would be the sale price of $250,000. On the other hand, for Ben who bought a house for $100,000, the amount realized would be the increase in the value of the house to $160,000 plus the $20,000 of the bank loan that has been paid off.