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2. In 2020, Leon Longrove sold a piece of business equipment that had an adjusted basis to him of $50,000 for $75,000 cash plus artwork that had a fair market value of $25,000. The buyer assumed Leon's $20,000 loan on the equipment. Leon paid $5,000 in selling expenses. What is the amount of Leon's gain on the sale

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Answer:

Leon's gain = $65,000

Explanation:

Total consideration received by Leon = $75,000 (cash) + $25,000 (artwork) + $20,000 (loan assumed by buyer) = $120,000

Leon's total costs = $50,000 (equipment's basis) + $5,000 (selling expenses) = $55,000

Leon's gain = total consideration received - total costs = $120,000 - $55,000 = $65,000

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