Recognized Gain Calculation on Sale of Apartment Building by Juan
Juan's Recognized Gain Calculation
Juan sold an apartment building for $750,000 in 2022 that he had purchased in 2012 for $500,000. The adjusted basis in the building as of the date of sale is $350,000. Juan will receive $100,000 in 2022 and $650,000 in 2023. Interest of 5% will also be charged and received by Juan.
Question:
What is Juan's recognized gain in 2022 and 2023?Answer:
Juan's recognized gain in 2022 is $400,000 and his recognized gain in 2023 is $0.Explanation: To calculate Juan's recognized gain in 2022, we need to subtract the adjusted basis of the apartment building from the selling price. The adjusted basis is $350,000, and the selling price is $750,000. Therefore, the recognized gain in 2022 is $750,000 - $350,000 = $400,000. In 2023, Juan will receive an additional $650,000. However, since he has already recognized the gain in 2022, there is no additional recognized gain in 2023. Therefore, the recognized gain in 2023 is $0. Overall, Juan's recognized gain in 2022 is $400,000 and his recognized gain in 2023 is $0.