Question

Moss exchanges a warehouse for a building he will use as an office building. The adjusted basis of the warehouse is $600,000 and the fair market value of the office building is $350,000. In addition, Moss receives cash of $150,000. What is the recognized gain or loss and the basis of the office building?a. ($100,000) and $350,000.b. $0 and $450,000.c. ($150,000) and $300,000.d. ($200,000) and $350,000.

Answer 1

correct option is b. $0 and $450,000

Step-by-step explanation:

given data

adjusted basis warehouse = $600,000

fair market value office building = $350,000

receives cash = $150,000

to find out

What is the recognized gain or loss and the basis of the office building

solution

we get first realized amount that is

realized amount = office building + cash

realized amount = 350000+ 150000

realized amount = $500000

adjusted basis = $600000

realized loss = $10000

and recognized loss = $0

and

basis of office building will be here as

basis of office building = office building + postponed loss

basis of office building = 350000 + 100000

basis of office building = $450000

so correct option is b. $0 and $450,000