Question

0.5 pts Question 15 George purchased a rental house (House A") in 2002 for $250,000. While George owned the house, George took depreciation deductions totaling $50,000 (assume this is the proper amount). George also made $100,000 worth of capital improvements to the house. In 2019, the rental house is worth $700,000. George wants to dispose of the rental house and obtain a new rental house ("House B"), also worth $700,000, but George does not want to pay tax on any gains. What would George's recognized gain or loss be if George exchanged House A for House B in a like-kind exchange? 0.5 pts Question 16 What would George's basis in House B be if George exchanged House A for House B in a like-kind exchange?

Answer 1

Answer:

First let us calculate George's basis in House A:

George's basis in House A = Purchase price - Depreciation claimed + Capital improvements made

= 250000 - 50000 + 100000

= $300,000

The FMV of house A now in 2019 is $700000 and George wants to exchanges house A for house B which is also worth $700000 in like kind exchange. The exchange does not involve any cash payment.

In this like kind exchange George will not recognize any gain and his basis in house B will be same as his basis in house A.

George's basis in house B if he exchanged house A for house B in a like-kind exchange = $300,000

$300,000