Question

Prater Inc. enters into an exchange in which it gives up its warehouse on 10 acres of land and receives a tract of land. A summary of the exchange is as follows: Accumulated Depreciation $59,500 Transferred Warehouse Land Mortgage on warehouse Cash Original FMV Basis $ 457,500 $ 239,000 74,500 74,500 33, 250 24,500 24,500 Assets Received Land FMV $523,250 What is Prater's realized and recognized gain on the exchange and its basis in the assets it received in the exchange? Realized gain Recognized gain Adjusted basis in new property

Answer 1

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solution : Gain and realized praters is $278000 10 gain gain adjusted basis in recognized is 1 8750 the land is & 254000 Description 1) Amount realzed in like-kind 2) Amount realized from boot 3) Total amount realized 4) Adjusted basis 3) Gain Realezed Amount $523250 33250 $556500 4278500) Explanation Given. FMV of land Mortgage retief () +(2) $ 239000 - $59500 +$74500 cland) +$24500 (cash) $278000 6) Gain Recognized $ 8750 Lesser of [ca) – cash paid or liability assomed] (5) 7) Deferred gain Adjusted basis in new property $269250 $254000 (5)-(6) (1)-(7) Note: * prater has debt relief of $ 33250 and can offset this boot with cash paid of & 24500 The offset rules allow a tax payer to offset debt retet with cash paid (or with other liabilities assomed - consequently, prater is against cash paid and only the $8750 net of as boot. allowed to net the debt relict he is treated as recaving liabitties he's been relieved