Louis owns three pieces of land with an adjusted basis as follows: parcel A, $75,000; parcel B, $125,000; and parcel C, $175,000. Louis sells parcel A to his uncle for $50,000, parcel B to his partner for $120,000, and parcel C to his mother for $150,000.

a. What is the recognized gain or loss from the sale of each parcel?

Total recognized Loss = $ 25,000 + $ 5,000 + $ 25,000 = $ 55,000

Explanation:

The journal entries would be

Sr. No Accounts Dr. Cr.

1 Uncle $ 50,000

Loss (Profit & Loss A/c) $ 25,000

Parcel A $ 75,000

2. Partner $ 120,000

Loss (Profit & Loss A/c) $ 5,000

Parcel B $ 125,000

3. Mother $ 150,000

Loss (Profit & Loss A/c) $ 25,000

Parcel B $ 175,000

Recognized gain or loss is the simply the gain or loss obtained from the difference between the sale value and the price of the asset

Total recognized Loss = $ 25,000 + $ 5,000 + $ 25,000 = $ 55,000