Alice owns land with an adjusted basis of $610,000,subject to a mortgage of $350,000.Real estate taxes are $9,000 per calendar year and are payable on December 31.On April 1,2014,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)$1,370,000
B)$1,372,219
C)$1,720,000
D)$1,722,219
E)None of these

Question

Quizplus · Accepted Answer

The amount realized is the sum of cash received, the note, the fair market value of the property received, and the mortgage assumed by the buyer. This totals $650,000 (cash) + $600,000 (note) + $120,000 (property) + $350,000 (mortgage) = $1,720,000. The real estate taxes are prorated for the period Alice owned the property, which is 3 months, so $9,000 * (3/12) = $2,250. The amount realized is $1,720,000 + $2,250 = $1,722,219.

Alice Owns Land with an Adjusted Basis of $610,000,subject to a Mortgage