Question

# Sam exchanges real estate for other real estate in a qualifying like-kind exchange. Sam’s basis in...

Sam exchanges real estate for other real estate in a qualifying like-kind exchange. Sam’s basis in the real estate given up is \$120,000, and the property has a fair market value of \$165,000. In exchange for his property, Sam receives real estate with a fair market value of \$100,000 and cash of \$15,000. In addition, the other party to the exchange assumes a mortgage loan on Sam’s property of \$50,000.

What is Sam's recognized gain, if any, on the exchange?

What is Sam’s basis in the property received?

Show work.

Solution:

1). What is Sam's recognized gain, if any, on the exchange?

Calculating gain realized:

 Details Amount(\$) Property fair value \$100,000 Liability assumed by other party \$50,000 Received cash \$15,000 Total realized amount \$165,000 Less: The adjusted basis of the property (\$120,000) Realized Gain \$45,000

 Details Amount(\$) Liability assumed by other party \$50,000 Received cash \$15,000 Total Boot received \$65,000

Thus,  Sam's recognized gain on exchange is = \$45,000. Because it is less than the total boot received.

2). What is Sam’s basis in the property received?​

 Details Amount(\$) Basis of he property given up \$120,000 Less: Boot received \$65,000 Add: Gain realized \$45,00 Basis of the property received \$100,000

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