Question

Sheila purchased Turner AAA bonds in May, 2016 for $47,600. In September 2018, she sold the bonds for $51,500, paying commission of $515. What is her: Amount realized ___________ Adjusted basis ___________ Realized gain/loss ___________ Recognized gain/loss ___________ Type of gain/loss ___________

Answer 1

1. $50,985

2. $47,600

3. $3,385

4. $3,385

5. Long term Gain

Explanation:

1. Amount realized = Sale consideration - Commission paid

= $51,500 - $515

= $50,985

2. Adjusted basis = equal to purchase cost

= $47,600

3. Realized gain = Sales - Purchase cost - Commission paid

= $51,500 - $47,600 - $515

= $3,385

4. Recognized gain = equal to Realized gain

= $3,385

5. Type of gain/loss = long term gain as the bonds are kept for higher than one year.

Therefore we applied the above formulas