Question

Metro Corp. traded Land A for Land B. Metro originally purchased Land A for $50,000 and...

Metro Corp. traded Land A for Land B. Metro originally purchased Land A for $50,000 and Land A’s adjusted basis was $25,000 at the time of the exchange.


What is Metro’s realized gain or loss, recognized gain or loss, and adjusted basis in Land B in each of the following alternative scenarios?

Problem 11-60 Part-c

c. The fair market value of Land A is $35,000 and Land B is valued at $40,000. Metro exchanges Land A and $5,000 cash for Land B. Land A and Land B are like-kind property.

(1) Amount realized from Land B:

(2) Amount realized from boot (cash):

(3) Total amount realized:

(4) Adjusted Basis:

(5) Gain/Loss Realized:

(6) Gain/Loss Recognized:

(7) Deferred Gain:

Adjusted Basis for Land B:

Homework Answers

Answer #1

Ans- The realised gain is $10,000 and the recognised gain is $0. Metro's basisin Machine B is $30,000. Adjusted Basis for Land B is calculated as below:-

Description Amount Explanation
(1) Amount realized from Land B $40,000 Given in example
(2) Amount realized from boot (cash) $0 Given in example
(3) Total amount realized $40,000 (1)+(2)
(4) Adjusted Basis $30,000 $25,000+$5,000 cash
(5) Gain realized $10,000 (3)-(4)
(6) Gain recognized $0 Lesser of (2) or (5)
(7) Deferred gain $10,000 (5)-(6)
Adjusted basis in new property $30,000 (1)-(7)
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