Question

Katrina, age 58, exchanged a limited partnership interest in a shoe manufacturing company in which her outside basis was $100,000 for a limited partnership interest in a boot manufacturing company and $10,000 cash. The fair market value of the boot manufacturing company is $260,000. Calculate her recognized gain

Answer 1

$150000

Step-by-step explanation:

Solution

The first step to take is to calculate the recognized gain.

Given that:

the outside basis = $100,000

Cash =$10,000

The fair market value of the boot manufacturing company is = $260,000

Now,

The Recognized gain is stated as follows:

The Fair Market Value - (Outside Basis + Cash)

= $260000 - ($100000 + $10000)

= $260000 - $110000

= $150000

Therefore her calculated gain is $150000