Distinction between a realized gain and a recognized gain

Reference no: EM13666298

1. Please explain the distinction between a "realized" gain and a "recognized" gain.

Recognized gain is when the IRS considers 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. Whereas, realized gain refer to the amount of money you actually earned in the sale of an asset.

2. Are there any limits to the deductibility of losses on sales and exchanges between related parties? What code section defines this limitation?

3. What is the basis of property received (i.e. new property) in a like-kind exchange? What is the holding period for the new asset?

To calculate the basis of the new property, you must start with the fair market value of the like-kind property received. Any deferred gain is subtracted and deferred losses are added.The holding period for property acquired in a nontaxable exchange includes the holding period of the property given in exchange if the property was a capital asset or property used in a taxpayer's trade or business.

4. David purchased stock in Zoll Corporation in 1985 for $6,000. On April 16, 2013 he gifted the stock to his daughter Susan; at the time of the gift, the Zoll stock was valued at $250,000. Susan sold the stock the next month for $252,000. What is Susan's gain or loss and what is the character of the gain or loss?

Susan would have a long term capital gain of $246,000

$252,000-6000= 246,000

The period that David held the stock would be included in Susan's holding period.

Reference no: EM13666298

Questions Cloud

The importance of economic factors in making her decision : Amanda, aged 28, has recently received an inheritance amounting to $200,000. She currently rents a unit in Lilyfield, paying $500 per week.

Determine the ratio of the masses of the ions : A singly charged ion of mass m is accelerated from rest by a potential difference ΔV. Determine the ratio of the masses of the ions

What amount of nonspontaneous and additional funds : What amount of nonspontaneous and additional funds

Calculate your monthly principal and interest payment : Calculate your monthly principal and interest payment?

Distinction between a realized gain and a recognized gain : Explain the distinction between a realized gain and a recognized gain and what is the basis of property received in a like-kind exchange? What is the holding period for the new asset

Describing an initial public offering for a global firm : Describing an initial public offering for a global firm

Determine the magnitude of the tension : A mass of 2 kilogram is being pulled in the positive x direction by a rope of tension T. Determine the magnitude of the tension

Redraw the circuit showing assigned voltage polarities : Redraw the circuit showing assigned voltage polarities and assigned current directions. Prepare a table that will contain calculated and measured values.

Find what is the efficiency of the engines : A 3250 kilogram airplane takes 12.5 minute to achieve its cruising altitude of 10.0 kilometer and cruising speed of 850 km/h. find what is the efficiency of the engines

User Account

All Pages