Problem 13-85 (a) (LO. 8)Norberto and Nita, who are married, listed their personal residence with a real estate agenton July 15, 2020, at a price of $985,000. They rejected several offers in the $900,000 rangeduring the fall. Finally, on November 3, 2020, they and the purchaser signed a contract tosell for $965,000. The sale (i.e., closing) took place on December 1, 2020. The closingstatement showed the following disbursements:Real estate agent's$38,000commissionAppraisal fee800Advertising cost for1,000saleRecording fees450Mortgage to First Bank 480,000Cash to seller444,750Norberto and Nita's adjusted basis for the house is $345,000. They owned and occupied thehouse for ten years and neither have sold any other residences in the past two years. OnDecember 20, 2020, they purchased another residence for $320,000. Norberto and Nita filea joint tax return.If an amount is zero, enter "0".a. Calculate Norberto and Nita's recognized gain on the sale.b. What is Norberto and Nita's adjusted basis for the new residence?c. Assume instead that the selling price is $860,000. What is their recognized gain? Theiradjusted basis for the new residence?Norberto and Nita's recognized gain is $and their adjusted basis for the newresidence is $

a . Sales proceeds realized = cash to seller + mortage closed = 444,750 + 480,000 = 924,750 b. Adjusted basis = purchase price = 320,000.c. Gain realized = 860,000 - 345,000 = 515,000 Gain recognized = 515000 - 500000 = 15,000 Basis in asset = 320,000 .

Answered: Real estate agent's $38,000 commission…

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Real estate agent's $38,000 commission Appraisal fee 800 Advertising cost for 1,000 sale Recording fees 450 Mortgage to First Bank 480,000 Cash to seller 444,750

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Concept explainers

Real Estate

Real estate means ownership of land along with the assets and natural resources that exist on the land. These properties are in real/physical form which is tangible. Real estate simply means land or addition made to land permanently like constructing a residence or different buildings. People invest in real estate to either reside or for wealth creation. Many people investing in real estate further lend the place for occupation or businesses in return for a monthly payment.

Question

Problem 13-85 (a) (LO. 8)
Norberto and Nita, who are married, listed their personal residence with a real estate agent
on July 15, 2020, at a price of $985,000. They rejected several offers in the $900,000 range
during the fall. Finally, on November 3, 2020, they and the purchaser signed a contract to
sell for $965,000. The sale (i.e., closing) took place on December 1, 2020. The closing
statement showed the following disbursements:
Real estate agent's
$38,000
commission
Appraisal fee
800
Advertising cost for
1,000
sale
Recording fees
450
Mortgage to First Bank 480,000
Cash to seller
444,750
Norberto and Nita's adjusted basis for the house is $345,000. They owned and occupied the
house for ten years and neither have sold any other residences in the past two years. On
December 20, 2020, they purchased another residence for $320,000. Norberto and Nita file
a joint tax return.
If an amount is zero, enter "0".
a. Calculate Norberto and Nita's recognized gain on the sale.
b. What is Norberto and Nita's adjusted basis for the new residence?
c. Assume instead that the selling price is $860,000. What is their recognized gain? Their
adjusted basis for the new residence?
Norberto and Nita's recognized gain is $
and their adjusted basis for the new
residence is $

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