Question

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:

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)