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# Allen Aubrey exchanges his factory (adjusted basis of \$339,000 and fair market value of \$525,000) for...

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.

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.

Gain realized \$186,000

Gainrecognized \$165,000

MethodI: Basis of old property \$339,000

Plus: Gain recognized 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

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