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Fred and Sarajane exchanged land in a qualifying like-kind exchange. Fred gives up land with an...

Fred and Sarajane exchanged land in a qualifying like-kind exchange. Fred gives up land with an adjusted basis of $11,000 (fair market value of $16,000) in exchange for Sarajane's land with a fair market value of $12,000 plus $4,000 cash. How much gain should Fred recognize on the exchange?

a.$5,000

b.$1,000

c.$0

d.$4,000

e.None of these choices are correct

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Answer #1
Answer:
Given data,
Fair market value of land = $12,000 + $4,000
                                                     =   $16,000
Give up value of land = $11,000
Fred recognise on the exchange
            = Fair market value of land   (-) Give up value
            =   $16,000 (-) $11,000
            =    $5,000
Fred recognise on the exchange = $5,000
Option (a) is correct   - $5,000
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