Gain is the excess of the amount realized from a sale or other disposition of property over the adjusted basis of that property in the hands of the taxpayer. Loss is the excess of such basis over the amount realized. The amount realized is the sum of money received plus the fair market value of other property received, other than prorated real property taxes.
It should be noted that even though gain or loss is realized, it still may not be taxed (or deducted) because several provisions of tax law provide that realized gain is sometimes not recognized. (Click for an article on eliminating capital gains taxes when selling investment property.) Some of the more common non-recognition provisions will be discussed below.
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