Amount Realized
Barron's Accounting Dictionary:
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Amount Realized
Tax term applied to money obtained or the fair market value of property or services received upon sale or exchange of property. The initial step in computing the realized gain or loss on a sale is to figure out the amount realized.
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Investopedia Financial Dictionary:
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Amount Realized
The gain or loss resulting from a sale of an asset. The amount realized encompasses all forms of compensation, including cash, the value of any property received as payment and any liabilities that the purchaser assumes as a result of the transaction.
The amount realized does not include transaction costs such as commissions and other related fees.
Investopedia Says:
To calculate the amount realized, simply take the difference of the total consideration given and subtract the cost basis. If the difference is positive, then the amount realized is a gain. If the difference is negative, the amount realized is a loss.
The total consideration will also include any liabilities assumed, as in this example:
Assume you have sold some property that has an outstanding mortgage of $75,000 to a buyer. The buyer pays you $40,000 and assumes the mortgage. In this case, you would have realized a total gain of $115,000 ($40,000 payment + $75,000 mortgage transferred).
Related Links:
Find out how taxes are applied to your investment returns and how you can reduce your tax burden. Capital Gains Tax 101
Learn some tips on how to exit a position to the best of your advantage. To Sell Or Not To Sell
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Barron's Accounting Dictionary
Dictionary of Accounting Terms. Copyright © 2010 by Barron's Educational Series, Inc. All rights reserved.
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