Question

Devin transfers a building (adjusted basis of $15,000 and fair market value of $90,000) to Suns Corporation. In return, Devin receives 80% of Suns Corporation's stock (worth $65,000) and an automobile (fair market value of $5,000). In addition, there is an outstanding mortgage of $20,000 (taken out 15 years ago) on the building, which Suns Corporation assumes. With respect to this transaction, Devin’s recognized gain is

Answer 1

$62,000

Step-by-step explanation:

Calculation for Devin’s recognized gain

Fist step in to calculate the Consideration amount received by Devin’s

Consideration received by Devin’s=$65,000×0.80+$5,000+$20,000

Consideration received by Devin’s=$77,000

Second step is less the adjusted basis to the Consideration received by Devin’s in order to know the gain

Consideration received by Devin’s $77,000

Less Adjusted basis $15,000

Gain $62,000

($77,000-$15,000)

Therefore Devin’s recognized gain is $62,000