Question

Carey exchanges real estate for other real estate in a qualifying like-kind exchange. Carey's basis in the real estate given up is $120,000, and the property has a fair market value of $165,000. In exchange for her property, Carey receives real estate with a fair market value of $100,000 and cash of $15,000. In addition, the other party to the exchange assumes a mortgage loan on Carey's property of $50,000. a. Calculate Carey's recognized gain, if any, on the exchange. $ b. Calculate Carey's basis in the property received.

Answer 1

a. $45,000

b. $100,000

Step-by-step explanation:

The computations are shown below:

a. Recognized gain would be

= Fair market value of real estate + cash received + mortgage loan - Carey's basis in the real estate given up

= $100,000 + $15,000 + $50,000 - $120,000

= $45,000

b. For property received:

= Carey's basis in the real estate given up - cash received - mortgage loan + recognized gain

= $120,000 - $15,000 - $50,000 + $45,000

= $100,000