Legal Definitions - amount realized

Definition: The amount received by a taxpayer for selling or exchanging an asset, which can include cash, property, services received, or debts assumed by a buyer. This is different from gain or loss.

Example 1: If you sell your car for $10,000, the amount realized is $10,000.

Example 2: If you exchange your car for a new one and receive $5,000 in addition to the new car, the amount realized is the value of the new car plus the $5,000.

Explanation: Amount realized is the total amount received by the taxpayer for selling or exchanging an asset. It includes all forms of payment, such as cash, property, services, or debts assumed by the buyer. This is important for tax purposes because it determines the taxpayer's gain or loss on the sale or exchange of the asset.