Check my work Prater Inc. enters into an exchange in which it gives up its wareh

Question

Check my work Prater Inc. enters into an exchange in which it gives up its warehouse on 10 acres of land and receives a tract of land. A summary of the exchange is as follows: Original Accumulated Skipped Transferred Basis 54,000 23,750 Depreciation 49,500 FMV Warehouse Land Mortgage on warehouse Cash $342,500 280, 000 54,000 37,000 23,750 eBook Print Assets Received Land FMV $383,250 What is Prater's realized and recognized gain on the exchange and its basis in the assets it received in the exchange? Realized gain Recognized gain Adjusted basis in new property

Explanation / Answer

Answer

Prater’s realized and recognized gain and its basis in the assets it received in the exchange:

Lesser of [2 – Liability assumed] or 5. (37000-23750)

Particulars Calculation/explanation Amount 1. Amount realized in like-kind $383250 2. Amount realized from boot mortgage relief $37000 3. Total amount realized (383250+37000) $420250 4. Adjusted basis ($280000-49500)+54000+23750(Liab.) $308250 5. Gain realized (3-4) (420250-308250) $112000 6. Gain recognized

Lesser of [2 – Liability assumed] or 5. (37000-23750)

$13250 7. Deferred gain 5-6 (112000-13250) 98750 8.Adjusted basis in new property 1-7 ($383250-98750) $284500

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