Question

Alice owns land with an adjusted basis of $610,000, subject to a mortgage of $350,000. On April 1, Alice sells her land subject to the mortgage for $650,000 in cash, a note for $600,000, and property with a fair market value of $120,000. What is the amount realized?

a. $1,250,000
b. $1,370,000
c. $1,720,000
d. $1,820,000
e. None of the above

Answer 1

The amount realized in this scenario is $1,120,000.

Step-by-step explanation:

The amount realized in this scenario can be calculated by adding the cash received, the fair market value of the property received, and the outstanding mortgage balance. In this case, Alice received $650,000 in cash and property with a fair market value of $120,000. The outstanding mortgage balance is $350,000. Therefore, the amount realized is $650,000 + $120,000 + $350,000 = $1,120,000.