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(1) In order to acquire Property #1, Holly transfers $50,000 of cash to George. In addition,...

(1) In order to acquire Property #1, Holly transfers $50,000 of cash to George. In addition, Holly takes Property #1 subject to an existing $63,000 mortgage, gives George her own promissory note in the amount of $75,000 and a Corvette with a FMV of $47,000 and an adjusted basis in Holly’s hands of $40,000

If George had originally purchased Property #1 for $100,000, what is the amount of gain that he should recognize?

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Answer #1
Particulars Amount
Cash received                  50,000
Mortgage relief                  63,000
Promissory note received                  75,000
FMV of corvette                  47,000
Amount realized               235,000

Gain on sale = 235,000 amount realized - 100,000 cost = 135,000

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