Taxpayer T owns an office building worth $950,000, encumbered by a mortgage of $710,000. His original...

Taxpayer T owns an office building worth $950,000, encumbered by a mortgage of $710,000. His original cost was $830,000, and he has taken depreciation deductions of $185,000 on the building.

T wants to exchange his building for another office building worth $800,000. He will assume the existing mortgage of $580,000 on the new building.

(This is a practice problem for an exam, please show work so I can understand the problem and how to get the correct answer.)

As stated, would this be a fair arms-length exchange? If not, who should be required to pay cash boot, and how much? Explain.
Assuming the exchange is made under the terms of your answer to #1, compute the following for T, showing all calculations:

a. Realized gain

b. Recognized gain

c. Basis in the new building

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Expert Solution

Colby Messinger answered 2 years ago

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