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 1,2015,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 the above

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. Therefore, $650,000 (cash) + $600,000 (note) + $120,000 (property) + $350,000 (mortgage) = $1,720,000. Additionally, the real estate taxes are prorated, so Alice is responsible for 3 months of taxes ($2,250), which increases the amount realized to $1,722,219.

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