Question

Bud exchanges land with an adjusted basis of $ 22,000 and a fair market value of $ 30,000 for another parcel of land with a fair market value of $ 28,000 and $2,000 cash. What is Bud's recognized gain or loss?

a. $0
b. $2,000
c. $6,000
d. $8,000
e. None of the above

Answer 1

Given :

Bud exchanges land with an adjusted basis of $ 22,000 and a fair market value of $ 30,000 for another parcel of land with a fair market value of $ 28,000 and $2,000 cash.

To Find :

What is Bud's recognized gain or loss.

Solution :

This is a transaction of like kind exchange.

So, gain or loss to be recognized is :

`= ( 28000+2000) - 28000\\\\=\$ 2000`

Therefore, option B) is correct.