Question

Paul is exchanging a building with a market value of $600,000.00 and an adjusted basis of $450,000. He is exchanging it for an apartment building owned by Carpenter which has a market value of $800,000 and an adjusted basis of $375,000. For Carpenter's building, investor Paul exchanges his building plus a cash boot of $75,000. Will there be any tax paid on this transaction?

Answer 1

Carpenter will have to pay taxes for a recognized gain of $150,000

Step-by-step explanation:

When you are calculating taxes, you must use the adjusted a¿basis of the buildings.

Paul is exchanging a $450,000 building + $75,000 in cash for a $375,000 office building.

Paul's realized loss = $525,000 - $375,000 = $150,000

therefore Carpenter's recognized gain = $150,000