Alice Owns Land with an Adjusted Basis of $610,000,subject to a Mortgage

question 12

Multiple Choice

Alice owns land with an adjusted basis of $610,000,subject to a mortgage of $350,000.Real estate taxes are $9,000 per calendar year and are payable on December 31.On April 1,2010,Alice sells her land subject to the mortgage for $650,000 in cash,a note for $600,000,and property with a fair market value of $120,000.What is the amount realized?

• A)$1,370,000.
• B)$1,372,219.
• C)$1,720,000.
• D)$1,722,219.
• E)None of the above.

---

Definitions:

Working Capital

The difference between a company's current assets and current liabilities, indicating the liquidity available to run its day-to-day operations.

Income Tax Expense

The amount of money a company owes in taxes based on its net income.

After-Tax Discount Rate

The interest rate used to discount future cash flows to their present value, adjusted to account for taxes.

Straight-Line Depreciation

A method for allocating an asset's cost evenly across its useful life.