Which of the folan adjusted basis of s200,000. She exchanges it for a strip mall
ID: 2456347 • Letter: W
Question
Which of the folan adjusted basis of s200,000. She exchanges it for a strip mall building worth tenants, her recognized gain is $25,000 and her basis for the stri retail outlet for her business, her recognized gain is $0 and her b building is to be re 204. $225,000. Which of the following statements is correct? Latisha owns a ware house with an a in Latisha's business to store inventory and the strip mall building is to be rented to is to be used as a a. If the warehouse was used in Latisha's business to store inventory b. If the warehouse was used in Latisha's business to store inventory c. If the wareh p mall building is $225,000. in Latisha's business to store inventory and the strip mall building is to be used asa asis for the strip mall building is $200,000. s furniture a bunlding is to be rented to tenants, her recognized gain is $25,000 and her basis for the strip mall building is $225,000. d. Only b. and c. are correct. e. a., b., and c. are correct. ANSWER RATIONALE Both b. and c. describe like-kind exchangesExplanation / Answer
A section of the U.S. tax code known as 1031 allows investors to make a "like-kind"exchange of investment properties. A wide variety of investment properties can be swapped for others such as an apartment complex for land or an oil and gas property for a commercial strip mall. Investors can continue exchanging existing properties for new properties of equal or greater value, while defering any tax consequences.
Therefore, the explanation is provided for point b. And Latisha is allowed to defer the tax arising on transfer of her warehouse.
In point c, since the warehouse is used by her to store the personal use items, so the deferment benefit of capital gain does not apply to this exchange of warehouse by strip mall building. Hence, her recognized gain is $25000 in this case.
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