Week 7

1- Distinguish between realized gains and losses and recognized gains and losses. The IRS considers a recognized gain a profit earned from the sale of an asset. A recognized gain only considers the difference between the basis of the asset and the sale price .Recognized gain is the taxable gain. Recognized gain is the lesser of realized gain or the net boot received. Realized gains refer to the amount of money you actually earned in the sale of an asset. When calculating your realized gain, you must deduct any costs associated with the sale. This is the amount of gain that the investor made during ownership of the property. Realized gain is the increase in the taxpayer's economic position as a result of the exchange. In a sale, tax is paid on the realized gain.

47- On April 18, 2011, Jane Juniper purchased 30 shares of Bryan Corp. stock for $210, and on September 29, 2011, she purchased 90 additional shares for $900. On November 28, 2011, she sold 48 shares, which could not be specifically identified, for $576 and on December 8, 2011, she sold another 25 shares for $188. What is her recognized gain or loss? (Smith 10-22) 30 shares- $210 + 90 shares- $900= 120 shares- $1110. 48 shares- $576+ 25 shares- $188= 73 shares- $764. Recognized gain- $764.00

40- Debbie Davis and Elizabeth Engels exchanged like-kind property. Debbie had an adjusted basis of $12,000 in her property (fair market value is $15,000). Elizabeth's property had an adjusted basis of $9,000 and a fair market value of $10,500, and Elizabeth gave Debbie $4,500 in cash. Determine Debbie's and Elizabeth's realized gain or loss, recognized gain or loss, and the basis in their new property. (Smith 11-26) Debbie- (fair market value) $10,500+(cash) $4,500= $15,000 – (adjusted basis) $12,000. Gain realized- $3,000. Gain recognized- $4,500. Elizabeth- (fair market value) $15,000- (cash) $4,500= $10,500- (adjusted basis) $12,000. Realized loss- $1,500. Recognized loss- $4,500.

34- Jim Junction...