Question

I trade an apple orchard ( basis 100,000 and its FMV is 160,000) for an orange orchard FMV 160,000. What is my realized gain? Recognized gain? What is the basis in the new orchard?

What if I traded the orchard for another one with a FMV of 130,000 and a 30,000 car. What is my realized gain? Recognized gain? What is my basis in the new orchard? What is my basis in the car?

What if I traded the orchard for an airplane 160,000FMV. What is my realized gain? recognized gain? what is my basis in the airplane?

Answer 1

When an Apple Orchard having a basis of 1,00,000 and FMV of 1,60,000 is exchanged with Orange Orchard having FMV of 1,60,000:

1. Recognised Gain – 60,000
2. Realised Gain – NIL
3. Basis for New Orchard – 1,60,000

When Trading an Orange Orchard with another having an FMV of 1,30,000 and a Car of 30,000:

1. Realised Gain – (30,000)
2. Recognised Gain – (30,000)
3. Basis for New Orchard – 1,30,000
4. Basis for Car – 30,000

When an Orange Orchard having Basis of 1,30,000 is exchanged with the Airplane having FMV of 1,60,000:

1. Realised Gain – 30,000
2. Recognised Gain – 30,000 (Realised and Recognised Gain are same)
3. Basis for New Airplane – 1,60,000