In 2012, Penny exchanges a lot in Santa Barbara with a mountain view for a lot w

Question

In 2012, Penny exchanges a lot in Santa Barbara with a mountain view for a lot with an ocean view in a qualifying like-kind exchange. Penny's basis in the land given up is $100,000 and the property has a fair market value of $250,000. In exchange for her property, Penny recieves land with a fair market value of $200,000 and a cash of $20,000. In addition, the other party to the exchange assumes a mortgage loan on Penny's property of $30,000.

a.

calculate Penny's realized gain, if any, on the exchange

b.

calculate Penny's recognized gain, if any, on the exchange

c.

calculate Penny's basis in the property recieved

Explanation / Answer

Right answer for Part B

Boot is 20, 000 plus 30,000= $50, 000

Therefore recognized gain is $50,000

For Part C

The basis in the property is $200,000 minus deferred gain

deferred gain is $150,000 realized gain minus $50,000 recognized gain = $100,000

Basis= $200,000 minus $100,000= $100,000

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