Question

Yancy's personal residence is condemned as part of an urban renewal project. His adjusted basis for the residence is $665,400. He receives condemnation proceeds of $632,130 and invests the proceeds in stocks and bonds.

If an amount is zero, enter "0".

a. Calculate Yancy's realized and recognized gain or loss.

Yancy's realized (gain or loss) is $........., and Yancy's recognized (gain or loss) is $...........

b. If the condemnation proceeds are $695,343, what are Yancy's realized and recognized gain or loss?

Yancy's realized (gain or loss) is $..........., and Yancy's recognized (gain or loss) is $...........

c. Assume the house is rental property. Yancy's adjusted basis is $665,400 and he receives condemnation proceeds of $632,130 and invests the proceeds in stock. What are Yancy's realized and recognized gain or loss?

Yancy's realized (gain or loss) is $........., and Yancy's recognized (gain or loss) is $...........

Answer 1

Answer :-

(a)

Adjusted Basis = $665,400

Amount Proceeds = $632,130

Realized loss is $33,270 and recognized loss/gain is 0 as realized loss on the condemnation of a personal use asset is not qualified as recognized loss.

(b)

Adjusted Basis = $665,400

Amount Proceeds = $695,343

Realized and recognized gain is ($695,343 - 665,400) $29,943 as gain as realized gain on the condemnation of a personal use asset is not qualified s recognized gain.

(c)

If the house were income rental property, the realized loss of $33,270 would be able to qualify as recognized as it is an income-producing property