# Lisa sells business property with an adjusted basis of \$130,000 to her son, Alfred, for its fair market value of \$100,000.A . What is Lisa's realized and recognized gain or loss?B. What is Alfred's recognized gain or loss if he subsequently sells the property for \$138,000? For \$80,000?

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1. Lisa sells business property with an adjusted basis of \$130,000 to her son, Alfred, for its fair market value of \$100,000.
2. A . What is Lisa's realized and recognized gain or loss?
3. B. What is Alfred's recognized gain or loss if he subsequently sells the property for \$138,000? For \$80,000?
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Step 1

Introduction:

Recognized Gain/Loss: It is difference between the cost price of the asset less its selling price. It is the gain or loss earned from sale of asset or investment.

Realized Gain: It is the amount that is actually earned from sale of asset or investment. All the cost related to the sale of asset or investment are deducted from gain/loss to determine Realized gain/loss. It is gain/loss that is realized by the company.

Step 2

A) Adjusted Basis of the property = \$130,000

Fair Market Value (FMV) of the property = \$100,000

It is also mentioned that Lisa sold the property at FMV.

Adjusted Basis is the value of property after deducting all the tax related cost.

Realized Gain/(Loss) = Selling Price – Adjusted Basis

Realized Gain/(Loss) = \$100,000 - \$130,000

Realized Gain/(Loss) = (\$30,000)

Moreover, the Cost Price i.e. the value of the property at which Liza bought it, is not given. Hence, Recognized gain/loss cannot be determined.

Step 3

B) If, Alfred sells property at \$138,000 then,

Cost Price of the property = \$100,000

Selling Price of the property = \$138,000

Recognized Gain/(Loss) = Selling Price – Cost Price

Recognized Gain/(Loss) = \$138,000 - \$100,000

Recognized Gain/(Loss) = \$38,000

If Alfred sells the property at \$138,000 then his recognized gain would be \$38,000.

If, Alfred sells property at \$80,...

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