Question

Mateo exchanges a rental house at the beach with an adjusted basis of $225,000 and a fair market value of $200,000 for a rental house at the mountains with a fair market value of $180,000 and cash of $20,000. What is the recognized gain or loss?

a.$0
b.$20,000
c.($25,000)
d.($20,000)

Answer 1

a.$0

Step-by-step explanation:

Adjusted basis is the cost of a property and other related costs incurred in acquiring, maintaining, or upgrading the property.

Fair value represent the worth of a property. It is the amount that one should expect to fetch from the market if they were to sell the property.

The fair value or the worth for Mateo's rental house is $200,000. He obtains another rental house with a fair value of $180,000 and cash $20,000.

He exchanged property worth $200,000 for $200,000