Henry swaps his shopping center for Sarah’s office building, and the exchange qu
ID: 2474295 • Letter: H
Question
Henry swaps his shopping center for Sarah’s office building, and the exchange qualifies as a like-kind exchange. Henry’s adjusted basis for the shopping center is $600,000 and the center is subject to a liability of $180,000. The FMV of Sarah’s office building is $770,000 and it is subject to a liability of $100,000. Each asset is transferred subject to the liability. What is Henry’s recognized gain, if any, on the transaction; and what is his basis in the office building?
A)
Gain: $80,000
Basis: $680,000
B)
Gain: $250,000
Basis: $600,000
C)
Gain: $250,000
Basis: $680,000
D)
Gain: $80,000
Basis: $600,000
A)
Gain: $80,000
Basis: $680,000
B)
Gain: $250,000
Basis: $600,000
C)
Gain: $250,000
Basis: $680,000
D)
Gain: $80,000
Basis: $600,000
Explanation / Answer
Gains= ( FMV of Sahrah's office building 770,000- Liability 100,000) = $ 670,000
Less Shopping Center is ( 600,000- Liability 180,000) = $ 420,000
Gains = $ 250,000
Henry’s adjusted basis for the shopping center is = $ 600,000
Ans = B) Gain: $250,000
Basis: $600,000
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