Question

1.Joyce participated in a like-kind exchange up property with a basis of $100,000 and a fair market value of $130,000 in exchange for property with a fair market value of $80,000 plus $50,000 cash . What is Joyce’s basis in the new property she acquired?

Answer 1

Joyce's basis in the new property she acquired would be the sum of :-

Basis of the property given up + Gain recognized on the exchange

The gain realized on the exchange is the smaller of the two amounts:-

1.) Realized Gain :- Fair market value of property received - Adjusted basis of property transferred = $130,000 - $100,000 = $30,000

or

2.) The Cash received = $50,000

Hence, the recognized gain = $30,000

Hence, Joyce basis in the new property she acquired is :- $100,000 basis in asset given up + $30,000 recognized gain = $130,000

answered by: anonymous