Question

Jacob inherited a farm his grandfather had purchased 50 years ago for $40,000. It was valued at $1,000,000 when his grandfather died but has a current value of $1,100,000. Jacob did not like farming so he traded the farm for an apartment building valued at $950,000 owned by Sam that has a basis of $700,000. In addition, Jacob received $150,000 in cash from Sam to finalize the exchange.

a. What are the amounts realized by Jacob and Sam on the exchange?

b. What are the gains or losses realized by Jacob and Sam on the exchange?

c. What are the gains or losses recognized by Jacob and Sam on the exchange?

d. What are the bases of the properties received by Jacob and Sam?

Answer 1

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