Monday, December 11, 2006

Word of the Day -- "Realized Gain"

I've had several emails from readers recently asking about certain definitions. So when I have time I'm going to include a word or phrase from real estate, and provide a definition. I try to post in as simple language as possible, but sometimes I get caught up in jargon. For those whom I confused, GET OVER IT! No seriously, sorry about that. I promise to work to explain as much as possible without talking down to people.

Here's the word/phrase for today: "Realized Gain." Realized Gain in a tax-free exchange is a gain that has occurred financially, but is not necessarily taxed. Example -- Reggie's land has a tax basis of $10,000. Its market value is $75,000. He exchanges the land, tax free under Section 1031 of the IRS Code, for Pam's warehouse, which was appraised at $75,000. Reggie's realized gain is $65,000. None of his realized gain is recognized, however, because he did not receive boot.

No comments: