Question

1.     Answer questions on the following like-kind exchanges (fill out the blanks)

	Adjusted basis of old asset	Boot given	FMV of new asset	Boot received	Realized Gain/(loss)	Recognized gain	Postponed Gain/(loss)	New basis of received property
a.	17000	0	14000	0
b.	15000	0	29000	0
c.	4000	6000	8000	500
d.	16000	0	28000	0
e.	7000	0	12000	4000

Answer 1

	Adjusted basis of old asset	Boot given	FMV of new asset	Boot received	Realized Gain/(loss)	Recognized gain	Postponed Gain/(loss)	New basis of received property
a.	17000	0	14000	0	(3000)	0	(3000)	20000
b.	15000	0	29000	0	14000	0	14000	1000
c.	4000	6000	8000	500	(1500)	0	(1500)	5500
d.	16000	0	28000	0	12000	0	12000	4000
e.	7000	0	12000	4000	9000	4000	5000	2000

EXPLANATION:

STEP 1:CALCULATION OF REALIZED GAIN/(LOSS)

realized gain/(loss)=(FMV of new asset+boot recieved)-(adjusted basis of old asset+boot given)

a.(14000+0)-(17000+0)=(3000)

realized loss=3000

b.(29000+0)-(15000+0)=14000

realized gain =14000

c.(8000+500)-(4000+6000)=(1500)

realized loss=1500

d.(28000+0)-(16000+0)=12000

realized gain =12000

e.(12000+4000)-(7000+0)=9000

realized gain =9000

STEP 2:CALCULATION OF RECOGNIZED GAIN

recognized gain=lesser of boot recieved or realized gain

a.0

b.lesser of 0 or 14000

hence 0

c.0

d.lesser of 0 or 12000

hence 0

e lesser of 4000 or 9000

hence 4000

STEP 3:CALCULATION OF POSTPONED GAIN/(LOSS)-

postponed gain/(loss)=relized gain/(loss) -recognized gain/(loss)

a.postponed loss=3000-0

                         =3000

b.postponed gain=14000-0

                         =14000

c.postponed loss=1500-0

                         =1500

d.postponed gain=12000-0

                         =12000

e.postponed gain=9000-4000

                         =5000

STEP 4: CALCULATION OF NEW BASIS OF PROPERTY RECIEVED-

new basis of property recieved=FMV-postponed gain or FMV +postponed loss

a.17000+3000=20000

b.15000-14000=1000

c.4000+1500=5500

d.16000-12000=4000

e.7000-5000=2000