Horace sells equipment with an adjusted basis of $20,000 to his great-grandson, Matthew, for its fair market value of $15,000. Matthew sells the equipment to an unrelated party for $17,000. What are Matthew's realized and recognized gains (losses) upon the sale?

The recognized gains upon the sale is $2000.

Explanation:

As the cost of purchase of the equipment to Mathew is $15000 and the sale proceeds received is $17000. The gain is actually calculated as follows;

Gain = Sale proceeds - Cost of equipment

Gain = Matthew sells the equipment to an unrelated party for $17,000 - Matthew bought equipment for its fair market value of $15,000

Which is $1700 - $1500 = $2000

Therefore the recognized gains upon the sale is $2000.