Question

Logan and Johnathan exchange land, and the exchange qualifies as like kind under § 1031. Because Logan's land (adjusted basis of $118,000) is worth $141,600 and Johnathan's land has a fair market value of $112,100, Johnathan also gives Logan cash of $29,500. a. Logan's recognized gain is $ . b. Assume that Johnathan's land is worth $127,440 and he gives Logan $14,160 cash. Logan's recognized gain is $ .

Answer 1

A. 23,600

B. 14,160

Step-by-step explanation:

land adjusted basis = $118,000

land worth = $141,600

fair market value of land = $112,100

Requirement A

Amount realized = Fair value + cash received

Amount realized = 112,100 + 29,500

Amount realized = 141,600

Less: adjusted basis = 118,000

Realized gain = 23,600

Note: Recognized gain is lower of cash received and realized gain

In this case, realized gain is lower so,

Logan's Recognized gain = 23,600

Requirement B

Amount realized = Fair value + cash received

Amount realized = 127,440 + 14,160

Amount realized = 141,600

less adjusted basis = 118,000

Realized gain = 23,600

Note: Recognized gain is lower of cash received and realized gain

In this case, cash received is lower So,

Logan's Recognized gain = 14,160