For each of these cases, find the gain realized, the gain recognized, and the ne
ID: 2558333 • Letter: F
Question
For each of these cases, find the gain realized, the gain recognized, and the new basis for each item. All real estate is for investment purposes except where the problem indicates otherwise.
1. Individual A traded his farm (basis $100,000, FMV $450,000) and a tractor (basis $10000, FMV $10,000) for Individual B's warehouse (basis $150,000). A also assumed B's mortgage of $200,000. FMV of Warehouse=660,000
2. Individual C traded an office building (basis $65,000, FMV $400,000) and $100,000 in cash for individual D's apartment building (basis $50,000). There is a $200,000 mortgage on the apartment building, and C will assume that mortgage.
Explanation / Answer
Answer
1.
A's Farm
Gain Realised = $450,000 - $100,000 = $350,000. Gain recognised would be $350,000 and
the new basis would be $450,000.
A's Tractor
Gain Realised = $10,000 - $10,000 = NIL.
The new basis would be same as earlier i.e $10,000.
B's Warehouse
Gain Realised = $660,000 - $150,000 = $510,000.
B's mortgage = $200,000
Gain Recognised = $510,000 - $200,000 = $310,000
The new basis is $660,000.
2.
Realised gain should be recognised to the extent of cash received $100,000.
Particulars Amount FMV of the building $400,000 Add Cash received $100,000 Total $500,000 Less: Basis of building exchanged ($50,000) Less: Mortgate on apartment ($200,000) The gain recognized $250,000Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.