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?

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Solutions

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 1 year ago

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