Question

Which of the following is accurate regarding gain recognition on the repossession of qualified real property? Recognized gain on the repossession is limited to the __________.

	gross profit on the original sale minus the total gain already reported, plus the costs of repossession.
	sales price of the property plus the total gain already reported, minus the costs of repossession.
	sales price of the property minus the total gain already reported.
	total gain on the original sale plus the total gain already reported, minus the costs of repossession.

Answer 1

Gain recognition on the repossession of qualified real property.

Gain on repossession of real property is amount realised from the original sale, reduced by the amount already reported as income and the amount paid by you in connection with re acquisition of the property.

Thus the recognised gain is limited to amount by which the sale price of the property exceeds the property's adjusted basis ( i.e. gain on original sale) Less the amount of gain on original sale that was reported as income before reacquisition, and the amount of money and the fair market value of the other property paid by you in connection with reacqusition.