Question

In: Accounting

The following question is an like-kind exchange. A's factory is $100,000 and has a $5,000 mortgage...

The following question is an like-kind exchange.

A's factory is $100,000 and has a $5,000 mortgage debt. the adjusted basis is $12,000.

B’s factory is $100,000 and has a $5,000 mortgage debt. the adjusted basis in the is $22,000.

A and B have agreed to relieve one another of any liability on the other party’s debts.

Whats A's recognized gain ?

What A's Realized Gain?

Whats B's recognized gain ?

What B's Realized Gain?

Show Work

Expert Solution

Whats A's recognized gain,

There is no recognised gain for A's but $12,000 is the new adjusted basis for for factory which is received from B.

What A's Realized Gain,

= Fair value of Property received - Adjusted basis of Property given

= ($100,000 - $5000) - ($12,000 - $5,000)

= $95,000 - $7,000

= $ 88,000

Whats B's recognized gain,

There is no recognised gain for B's but $22,000 is the new adjusted basis for factory which is received from A.

What B's Realized Gain,

= Fair value of Property received - Adjusted basis of Property given

= ($100,000 - $5000) - ($22,000 - $5,000)

= $95,000 - $17,000

= $ 78,000

ekkarill92 answered 2 years ago

In a like-kind exchange, if there is a mortgage you are receiving/assuming and one you are...

In a like-kind exchange, if there is a mortgage you are receiving/assuming and one you are giving up, is that a part of the AB? How does that fit into the calculation of finding a gain, loss and the new adjusted basis?

Which of the following cannot be structured as a like-kind exchange? A) A business for an...

Which of the following cannot be structured as a like-kind exchange? A) A business for an investment B) An investment for a personal residence C) A business for a business D) A investment for an investment

Kristin wants to defer a like-kind exchange. In order to qualify as a deferred exchange Kristin...

Kristin wants to defer a like-kind exchange. In order to qualify as a deferred exchange Kristin must identify in writing, the property to be received within: 1) 30 days after the date that the property given up in the exchange is transferred. 2) 45 days after the date that the property given up in the exchange is transferred. 3) 60 days after the date that the property given up in the exchange is transferred. 4) 180 days after the date...

How do you calculate depreciation for a like-kind exchange for something that has a 5 year...

How do you calculate depreciation for a like-kind exchange for something that has a 5 year MACRS life using the half life convention (before the law was changed to just real property)?

Herman exchanges his apartment complex for Heidi’s farm, and the exchange qualifies as a like-kind exchange....

Herman exchanges his apartment complex for Heidi’s farm, and the exchange qualifies as a like-kind exchange. Herman’s adjusted basis for the apartment complex is $600,000 and the complex is subject to a $180,000 liability. The fair market value of Heidi’s farm is $770,000, and the farm is subject to a $100,000 liability. How much, if any, is Herman’s recognized gain and his basis in the farm? The amount of boot received by Herman is $80,000 ($180,000 minus $100,000). If each...

H.R. 1 has changed like-kind exchange treatment to allow 1031 to apply only to exchanges of...

H.R. 1 has changed like-kind exchange treatment to allow 1031 to apply only to exchanges of real estate. Read the following article that explains the history of 1031 and lists some pros and cons of 1031 treatment. Do you think the changes to 1031 which were included in H.R. 1 address the concerns? Should 1031 have been repealed entirely? Should it not have changed at all?POINT & COUNTERPOINT To Repeal or Retain Section 1031: A Tempest in a $6 Billion...

Pose a question like following that with some kind of uncertainty. Maybe environmental tax? An example...

Pose a question like following that with some kind of uncertainty. Maybe environmental tax? An example : Question: Why is unemployment insurance mandatory? I think this question pertains to the course because insurance is something that people buy to mitigate against uncertain outcomes. I suspect there might be some market failures due to moral hazard and/or adverse selection, and I would like to investigate these.

If there is a like-kind exchange of property between related parties, how long do they have...

If there is a like-kind exchange of property between related parties, how long do they have to wait to dispose of the property received in order to avoid having to recognize any gain on the exchange? A) 6 months B) 1 year C) 2 years D) no waiting period Please explain

When you receive boot in a like-kind exchange, other than cash received

When you receive boot in a like-kind exchange, other than cash received, do you take the FMV of the boot other than cash to compute Amount Realized? Other than cash received, can you include Assumption of a Liability and the FMV of inventory recieved in addition to the like-kind property and cash as a part of boot? Additionally, do you include the FMV of the assets other than like-kind exchanged for your new asset in adjusted basis in order...

Investors often use the like-kind exchange provisions in the tax code to defer recognition of gains...

Investors often use the like-kind exchange provisions in the tax code to defer recognition of gains when they want to dispose of an asset. These are complicated transactions which has lead to a small industry being created just to meet the requirements of the provisions. Unfortunately, there are two requirements of like-kind exchanges which are often messed up. If messed up, these result in nullifying all or part of the exchange benefit. (a) What are the requirements for like-kind exchange...