Patrice sells a parcel of land for $50,000 cash and the buyer assumes Patrice's liability of $7,000 on the land.Patrice's basis in the land is $40,000.What is the gain or loss she will recognize on the sale?

Question

Quizplus · Accepted Answer

To calculate the gain or loss on the sale of the land, we need to calculate the amount realized and subtract it from the basis.

Amount realized = Cash received + Liability assumed by buyer
Amount realized = $50,000 + $7,000 = $57,000

Gain or loss = Amount realized - Basis
Gain or loss = $57,000 - $40,000 = $17,000 gain

Therefore, Patrice will recognize a $17,000 gain on the sale. The correct answer is D.

Patrice Sells a Parcel of Land for $50,000 Cash and the Buyer