Question

Ava exchanges land used in her business with Gail for another parcel of land. The basis of Ava’s old land is $58,000, the FMV is $76,400, and she gives Gail cash of $19,600. Gail’s basis in her land is $82,000, and the FMV is $96,000. What is Ava’s adjusted basis in the new land she receives? Multiple Choice $58,000 $77,600 $76,400 $96,000

Answer 1

Ava's adjusted basis in the new land is the sum of her original basis in her old land ($58,000) plus the additional cash paid ($19,600), totaling $77,600.

Step-by-step explanation:

The question revolves around the calculation of adjusted basis in an exchange of business property.

When Ava exchanges her land for Gail's, alongside additional cash, we need to account for this to determine Ava's new basis in the land received.

Ava's original basis in her old land is $58,000.

Since she adds cash of $19,600, the total cost of the new land for Ava is the sum of her original basis and the additional cash paid out, which equals $77,600 ($58,000 + $19,600).

Thus, Ava's adjusted basis in the new land is $77,600.