Bob owns a capital asset held for investment purposes. The asset was purchased f
ID: 2450889 • Letter: B
Question
Bob owns a capital asset held for investment purposes. The asset was purchased for $200,000 five years earlier.
$5,000 of improvements were made this year and routine maintenance of $2,000 was needed.
The asset is subject to a $60,000 liability.
During the current year, Bob transfers the asset to Becca in exchange for $89,000 cash and new equipment with a $40,000 FMV.
Becca assumes the liability of the transferred asset.
Calculate the following for Bob:
1) Amount realized.
2) Adjusted basis.
3) Realized gain or loss.
Explanation / Answer
Answer:1) Amount Realized= Received in cash +FMV of the equipment+Liability assumed
=$89000+$40000+60000=$189000
Answer:2) Adjusted basis=cost of asset+ Improvement +MAintenance
=200000+5000+2000=207000
Answer:3) Realized gain or loass=Amount realized -Adjusted loss
=189000-207000
=-18000