Question

Allen Aubrey exchanges his factory (adjusted basis of $339,000 and fair market value of $525,000) for an apartment building with a fair market value of $360,000. He also receives $165,000 in cash. What is his realized and recognized gain or loss? Determine the basis of his apartment building using two different methods.

Answer 1

FMV=360,000+ 165,000-AGI 339,000-=186,000

Realized gain =165,000 ,

recognized gain =21,000

deferred 360,000 – 21,000 = 339,000

Like kind exchanges:Basis and Gain or loss

Allen's realized gain is$186,000, his recognized gain is $165,000, and the basis of the new property is $339,000.

FMVreceived ($360,000 + $165,000)$525,000

Less: Adjusted basis 339,000

Gain realized $186,000

Gainrecognized $165,000

MethodI: Basis of old property $339,000

Plus: Gain recognized 165,000

Less: Boot received 165,000

Basisof new property $339,000

MethodII: FMV of new property $360,000

Less: Deferred gain ($186,000 - $165,000)21,000

Basisof new property $339,000