Question

# Fred owns land with an adjusted basis of \$60 and a fair market value of \$100....

Fred owns land with an adjusted basis of \$60 and a fair market value of \$100. The land is subject to a mortgage of \$4. Fred sells the land to Dell who gives Fred \$96 in cash and assumes the mortgage. 1) Does Fred realize gain/loss on the transaction and if yes how much? 2) Does Fred recognize gain/loss on the transaction and if yes how much?

Fair Market Value of the LAnd = \$ 100

Less: Adjusted Basis = \$ 60

Gain on the transaction = \$ 40

So Fred recognize the gain of \$ 40.

Note: Land is subject to mortgage of \$ 4 which is included in the cost of land or in the adjusted basis. So the this amount is paid by the Dell seprately so total cost to Dell is \$ 96 + \$ 4 = \$ 100 and this is same to market value of the land.

And there is difference in market value and adjusted value = Gain on the trannsaction = \$ 100 - \$ 60 = \$ 40

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