Qu10-1, Realized Gain - This is the amount of gain that the investor made during ownership of the property. The owner calculates this by determining the net sales price (sales price of the property less closing costs) and then subtracts the adjusted tax basis of the property (the formula is relatively simple and your accountant can help you with this).Recognized Gain - This is the taxable portion of the above "realized gain." Typically, the only taxable portion of realized gain is the boot received after the sale. So, to summarize, the key to using a 1031 exchange is to take a realized gain and reinvest it into another property. Done correctly, there will be no boot, and therefore no recognized gain to be taxed. You will always have a loss or a gain due to an exchange transaction. One the transaction is completed the corresponding amount will be recorded on your income statement. Recognition exists only in the context of tax laws, in some cases the exchange transaction will be excluded under IRC Section 1031.
Pr 10-47, On April 18, 2010, Jane Juniper purchased 30 shares of Bryan Corp. stock for $210, and on September 29, 2010, she purchased 90 additional shares for $900. On November 28, 2010, she sold 48 shares, which could not be specifically identified, for $576 and on December 8, 2010, she sold another 25 shares for $188. What is her recognized gain or loss?
$210/30=$7 per share - April 18, 2010
$900/90=$10 per share - September 29, 2010
I will use FIFO to calculate the recognized gain or loss:
November 28, 2010 – Sold 48 shares for $576, the cost basis was $390 (30*$7 plus 18*$10) therefore the total gain was $186.00
December 8, 2010 - Sold 25for $188, cost basis was $250 (25*$10) therefore the total loss was $62.
Jane Juniper had an overall gain for the year of 2010 of $124.00
11-40,
Debbie Elizabeth
Property exchanged $15,000 $10,500
Boot received $12,000 $9,000
FMV (realized gain) 0 $4,500
Adjusted Basis $3,000 (15,000-12,000) $6,000 (15,000-9,000)
New property basis $12,000 (12,000+0.00) $13,500 (9,000+4,500)
12-34,
12-48, 