Question

Company B and Firm W exchanged the following business real estate:

	Blackacre (exchanged by B)				Whiteacre (exchanged by W)
FMV	$	486,000			$	562,000
Mortgage		(121,500	)			(197,500	)
Equity	$	364,500			$	364,500

1. If B’s adjusted basis in Blackacre was $291,600, compute B’s realized gain, recognized gain, and basis in Whiteacre.
2. If W's adjusted basis in Whiteacre was $112,400, compute W’s realized gain, recognized gain, and basis in Blackacre.

Answer 1

Answer
Explanation :
Particulars	Calculation	Amount($)
Realized Gain	(562,000-(291,600+76,000*))	$             3,46,400
Recognized Gain		No Gain
Basis	(291600+76000)	$             3,67,600
$197,500-$121,500 = $76,000 Net Debt Relief
B)
Particulars	Calculation	Amount($)
Realized Gain	(486,000+76,000)-112,400)	$             4,49,600
Recognized Gain	(Net Debt Relief)	$                76,000
Basis		$             1,12,400