Question

If investor A exchanges a building worth $200,000 for investor B's building worth $150,000, a car worth $20,000, and $30,000 in cash, investor A has a taxable boot of

a) $0
b) $20,000
c) $30,000
d) $50,000

Answer 1

Investor A's taxable boot is the sum of the car worth $20,000 and cash $30,000, totaling $50,000.

Step-by-step explanation:

The question asks about a scenario where investor A exchanges a building with a smaller property, a car worth $20,000, and a cash amount. The term 'taxable boot' refers to any additional value received in the transaction that is not like-kind, for example, cash or a car in this scenario. Investor A gives up a property valued at $200,000 and receives a property worth $150,000, a car worth $20,000, and $30,000 in cash. The taxable boot, therefore, would be the sum of the cash and the value of the car, which adds up to $50,000.