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Kase, an individual, purchased some property in Potomac, Maryland, for $225,000

ID: 2705693 • Letter: K

Question

Kase, an individual, purchased some property in Potomac, Maryland, for $225,000 approximately 10 years ago. Kase is approached by a real estate agent representing a client who would like to exchange a parcel of land in North Carolina for Kase

Kase, an individual, purchased some property in Potomac, Maryland, for $225,000 approximately 10 years ago. Kase is approached by a real estate agent representing a client who would like to exchange a parcel of land in North Carolina for Kase

Kase, an individual, purchased some property in Potomac, Maryland, for $225,000 approximately 10 years ago. Kase is approached by a real estate agent representing a client who would like to exchange a parcel of land in North Carolina for Kase's Maryland property. Kase agrees to the exchange. What is Kase's realized gain or loss, recognized gain or loss, and basis in the North Carolina property in each of the following alternative scenarios? The transaction qualifies as a like-kind exchange and the fair market value of each property is $800,000. The transaction qualifies as a like-kind exchange and the fair market value of each property is $156,000.

Explanation / Answer

a.

Total Amount realised = 800000+0 = $800000


Gain Realised = 800000 - 225000 = $ 575000


Deffered Gain = 575000-0 = $ 575000 {Since recognised gain = 0}


Hence Adjustable Basis in New Property = 800000 - 575000 = $ 225000



b Total Amount realised = 156000+0 = $156000


Adjustable basis = -156000 + 225000 = $ 69000




Deffered Loss = 69000-0 = $ 69000 {Since recognised loss = 0}


Hence Adjustable Basis in New Property = 69000 + 156000 = $ 225000