J.K. Lasser's Your Income Tax 2013: For Preparing Your 2012 Tax Return

5.14 Amount Realized Is the Total Selling Price

Amount realized is the tax term for the total selling price. It includes cash, the fair market value of additional property received, and any of your liabilities that the buyer agrees to pay. The buyer’s note is included in the selling price at fair market value. This is generally the discounted amount that a bank or other party will pay for the note.

Sale of mortgaged property.

The selling price includes the amount of the unpaid mortgage. This is true whether or not you are personally liable on the debt, and whether or not the buyer assumes the mortgage or merely takes the property subject to the mortgage. The full amount of the unpaid mortgage is included, even where the value of the property is less than the unpaid mortgage. Computing amount realized on foreclosure sales is discussed in Chapter 31 (31.9).

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Caution

Mortgaged Property

When you sell mortgaged property, you must include the unpaid balance of the mortgage as part of the sales price received, in addition to any cash.

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If, at the time of the sale, the buyer pays off the existing mortgage or your other liabilities, you include the payment as part of the sales proceeds.

EXAMPLES

1. You sell property subject to a mortgage of $60,000. The seller pays you cash of $30,000 and takes the property subject to the mortgage. The sales ...