What it means
The concept exists because a sale price and the value a seller genuinely receives are often different numbers. A buyer who assumes a $250,000 mortgage has handed over real value even though no cash changes hands for that portion, so it counts towards the amount realised.
Property received in kind counts too, at its fair market value on the date of the exchange. Swap a piece of land for a warehouse plus a cash top up and the amount realised is the warehouse's market value plus the cash, not some notional figure the parties agree between themselves.
Costs of disposal work in the other direction. Broker commission, legal fees, transfer taxes and closing costs reduce the amount realised, which is why the number that reaches a tax return is almost always below the headline price on the contract.
Once you have the amount realised, the gain or loss falls out by subtracting the adjusted basis, meaning original cost plus capital improvements less depreciation already claimed. Depreciation is the key trap: every year of write-offs lowers the basis and therefore raises the eventual taxable gain.
The term also carries a wider commercial use. Business owners talk about the amount realised on a disposal when they mean net proceeds, and the discipline of counting assumed liabilities and subtracting deal costs is exactly the discipline needed to work out what a sale actually delivers.
In practice
Real-world examples.
Example
A restaurant group sells a lease and fit-out for $320,000 cash while the buyer assumes $60,000 of equipment finance. After $28,000 of legal and agency fees, the amount realised is $352,000, well above the cash the sellers actually bank.
Example
A software founder swaps a minority holding for shares in an acquiring company worth $1,400,000 plus $200,000 in cash. The amount realised is $1,600,000 less transaction costs, even though only the cash portion is spendable on the day.
Example
A farming partnership sells 40 acres for $600,000 but pays $18,000 in survey, legal and transfer costs. The amount realised of $582,000 is the figure used against the adjusted basis, and the partners are caught out when depreciation on old drainage works pushes the taxable gain higher than expected.
Formula
Calculation
Amount realised = cash received + fair market value of property received + liabilities assumed by the buyer - selling expenses
Gain or loss = amount realised - adjusted basis
A distribution company sells a warehouse. It receives $900,000 in cash, and the buyer takes over the outstanding $250,000 mortgage on the building. Agent commission and legal fees come to $45,000.
Amount realised = $900,000 + $250,000 - $45,000 = $1,105,000.
The warehouse was bought for $700,000, had $80,000 of capital improvements added, and $180,000 of depreciation had been claimed, giving an adjusted basis of $700,000 + $80,000 - $180,000 = $600,000. The gain is therefore $1,105,000 - $600,000 = $505,000, of which the $180,000 tied to prior depreciation is typically taxed at a different rate from the rest.Case study
Seen in the real world.
This is an illustrative, fictional example. Belmore Print Works, an invented commercial printing business, agreed to sell its production building for a headline $1,150,000 and the owners budgeted for a gain of roughly $450,000 against what they thought the building had cost them.
Their accountant rebuilt the numbers properly. Cash on completion was $900,000, the buyer assumed a $250,000 mortgage, and selling costs came to $45,000, giving an amount realised of $1,105,000. On the other side, twelve years of depreciation totalling $180,000 had cut the adjusted basis from $780,000 of cost and improvements down to $600,000.
The gain was $505,000, not $450,000, and a large slice of it attracted the higher rate applied to recaptured depreciation. In this fictional case the owners had already committed the expected after-tax proceeds to a new site, and the shortfall forced them to renegotiate the deposit on the replacement building.
Watch out
Common mistakes.
- Counting only the cash received and forgetting that debt the buyer takes over is part of the value obtained.
- Using the original purchase price as the basis, when years of depreciation and capital improvements have moved it a long way.
- Forgetting to subtract commission, legal fees and transfer costs, which overstates the gain and the tax bill alongside it.
Questions
People also ask.
Is the amount realised the same as the sale price?
No, it adds assumed liabilities and property received in kind, and subtracts the costs of making the sale.
What happens if the amount realised is below the adjusted basis?
The disposal produces a loss, though whether that loss is deductible depends on the type of asset and how it was used.
Does an instalment sale change the figure?
The amount realised is still measured on the full deal, but the taxable gain is spread across the years in which the payments are received.
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