Question

Mr. Wall owned an apartment building with an adjusted cost basis of $220,000 and a fair market value of $330,000. He exchanged the property for an apartment house which had a fair market value of $365,000. Both properties were free and clear and no adjustment was made for the differences in value. For federal income tax purposes, the new property will have a basis for Mr. Wall of:

Answer 1

To determine the new basis for Mr. Wall's property, we need to consider the fair market value of both the old and new properties. Given that the old property had a fair market value of $330,000 and the new property had a fair market value of $365,000, the new property will have a basis of $255,000.

Step-by-step explanation:

To determine the new basis for Mr. Wall's property, we need to consider the fair market value of both the old and new properties. Given that the old property had a fair market value of $330,000 and the new property had a fair market value of $365,000, we can calculate the difference as follows:

Difference in Fair Market Value = New Property Fair Market Value - Old Property Fair Market Value

Difference in Fair Market Value = $365,000 - $330,000 = $35,000

Since Mr. Wall did not make any adjustments for this difference in value, the new property will have a basis of:

New Property Basis = Old Property Basis + Difference in Fair Market Value

New Property Basis = $220,000 + $35,000 = $255,000