Question

Repbulic LLC exchanged land used in its business for some new land to be used in the business. Republic LLC originally purchased the land it exchanged for $37,500. The new land had a fair market value of $39,750. Arlington also received $11,500 of cash in the transaction. What is Republic LLC's recognized gain or loss on the exchange

Answer 1

Republic LLC's recognized gain on the exchange is $11,500

Step-by-step explanation:

In order to calculate Republic LLC's recognized gain or loss on the exchange we would have to calculate first the Realized gain and then compare it with the amount received by cash and value with less amount would be the recognized gain or loss on the exchange.

Therefore, Realized gain=Fair Market value of property received + Cash received - Adjusted basis of the property transferred

Realized gain=$39,750+$11,500-$37,500

Realized gain=$13,759

The cash in the transaction was $11,500.

Therefore, Republic LLC's recognized gain on the exchange is $11,500