Question

Steve Stromm transfers an office building with an adjusted basis of $200,000 and a fair market value of $300,000 for Andrew Astor's office building (adjusted basis $190,000) with a fair market value of $250,000. Steve's mortgage of $120,000 is assumed by Andrew whose mortgage of $70,000 is assumed by Steve. What is Andrew's Recognized Gain?

Answer 1

The correct answer is "10,000".

Step-by-step explanation:

The given values are:

Fair market value,

= $300,000

Andrew's adjusted basis,

= $190,000

Its fair market value,

= $250,000

Steve's mortgage,

= $120,000

Andrew's mortgage,

= $70,000

According to the question,

Steve is losing out,

=
`300000 - 200000 + 70000`

=
`170,000`

Andrew is losing out,

=
`250000 - 190000 + 120000`

=
`180,000`

Now,

Steve gains the amount,

=
`Andrew \ losing-Steve \ losing`

=
`180,000 - 170,000`

=
`10,000`

So that Andrew loses the same amount as Steve i.e.,

= 10,000