Question

Alex wrecked his car and received $22,000 from the insurance company to replace it. His basis in the car was $20,000 and he spent $15,000 on a replacement vehicle. What is the amount of the recognized gain?

Answer 1

Answer:

$2,000

Explanation:

The recognized gain is computed below:

Recognized gain = Received amount from the insurance company - Alex basis in car value

= $22,000 - $20,000

= $2,000

The recognized gain shows a difference between the received amount and his basis in car

The other information which is mentioned is ignored as it is not relevant for the computation part