"Amount recognized" refers to income you receive or losses you might want to deduct that need to be reported on your tax return. Recognizing income isn't about, um. illegally looking the other way...it's about what income is taxable or has impact on whatever calculation you're making.
When calculating the amount recognized when you sell a house, for example, you don't just list the straight profit from the sale. To calculate the amount recognized for what you would owe for tax purposes, you would take the sale price, subtract your selling costs (such as the broker fee), then subtract the original price you paid for the house. You also subtract the value of any improvements you made.
Or let’s say you bought a valuable piece of art by Andy Warhol for $100,000 (think: a napkin smudge). It was rather dirty so you paid someone $5,000 to clean it up. You then paid a broker $3,000 in commission to sell it at an auction for $200,000. To get the amount recognized for tax purposes, you would subtract the $3,000 from the sale price of $200,000 to equal $197,000. Then subtract the $100,000 you originally paid for it less the $5,000 cleaning fee to get $92,000, the “amount recognized” for your tax return.
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Finance: What is Opportunity Cost?348 Views
Finance What is opportunity cost All right Opportunity cost the
value you forfeit by choosing a path a over path
be and path a end or b can mean doing
nothing at all right Here's an example Opportunity cost people
Let's say you have a choice of taking two jobs
One is a safe steady gig with ibm You have
to commit to working there for twenty five years But
the big blue boss has promised that at the end
of that time period you'll get a good watch and
a million dollars twenty five years and a million bucks
and a reasonably decent lifestyle with low risk All right
well that's half a two years into the gig You
notice that a lot of your friends are whining about
taxes and they're buying porsche's You're still paying off school
loans working for ibm there Then ten years later your
friends or buying jets What happened Well they went to
work for a risky start up in silicon valley and
got stock options And of course you think we'll shoot
Where can i get me some of that Well you
committed to the safe steady big blue for twenty five
years you uh paid them with your commitment And in
the process you gave away other opportunities You might have
had teo make real bank by your own jets The
opportunity cost of your desire for a nice safe job
cost you big If you had been lucky enough to
get a Job at 1 of those hot startup you'd
be flushed with cash today just like your buddies All
right Another example And this happens to be a common
google interview question You win two free front row tickets
to a sick poppy's concert which sell on stubhub for
a thousand bucks each You decide to go to the
concert How much did the tickets cost you They were
free You say uh no You could have taken ninety
seconds fill out stub up form and gotten too grand
just selling them You chose not to receive the two
grand go to the concert instead which in a land
of opportunity cost lost is the same as paying two
grand for the tickets In other words money earned and
money lost It is not just counted by the dollar
bills that flow in between your fingers It's the value
in opportunities you take and in the value of the
ones you miss So when you see an opportunity take 00:02:04.09 --> [endTime] it especially if it gets you frequent flyer miles
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