Amount realized, in US federal income tax law, is defined by section 1001(b) of Internal Revenue Code.
"[2] The first step in calculating the amount realized is determining when an exchange that qualifies as a "realization event" has occurred.
In Helvering v. Bruun, the United States Supreme Court has held that a "[g]ain may occur as a result of exchange of property, payment of the taxpayer's indebtedness, relief from a liability, or other profit realized from the completion of a transaction.
"[3] More clearly, the Supreme Court lists four events that trigger realization of gain or loss: 1) a property exchange, 2) relief of a legal obligation owed to a third party, 3) relief of a legal obligation owed to the party receiving property, or 4) other profit transactions.
"[8] (Essentially, CSA and the four savings and loans associations exchanged $4.5 million worth of mortgage interests.)
The Supreme Court held that a realization event under § 1001 had occurred: [b]ecause the participation interests exchanged by Cottage Savings and the other [savings and loans associations] derived from loans that were made to different obligors and secured by different homes, the exchanged interests did embody legally distinct entitlements.
The realization requirement is a pervasive, popularly supported aspect of our tax system, and there is no indication Congress is about to reverse course in this regard.