Question

Lonnie owns land held for investment. The land's FMV is $130,000. Lonnie's basis in the land is $110,000. Lonnie exchanges the land, plus $15,000 of cash, for a warehouse owned by Terry. The warehouse is worth $190,000, but is subject to a mortgage of $35,000 which Lonnie will assume. Terry's basis in the warehouse is $105,000.

Required:
A) Lonnie's basis in the warehouse received will be ___________.

Answer 1

$175,000

Step-by-step explanation:

Data provided

Worth warehouse = $190,000

Cash = $15,000

The computation of Lonnie's basis in the warehouse received is shown below:-

Lonnie's basis in the warehouse received = Worth warehouse - Cash

= $190,000 - $15,000

= $175,000

Therefore for computing the Lonnie's basis in the warehouse received we simply deduct the cash from worth warehouse.