Problem 15-40 (c) (LO. 2) Judith owns an office building that has an adjusted ba

Question

Problem 15-40 (c) (LO. 2) Judith owns an office building that has an adjusted basis of $8,500,000 but is subject to a mortgage of $500,000. She transfers the office building to Jim and receives from him $350,000 in cash and an apartment complex with a fair market value of $7,900,000 at the time of the exchange. Jim assumes the $500,000 mortgage on the office building. a. What is Judith's realized gain or loss? Judith's realized is b. What is her recognized gain or loss? Her recognized is c. What is the basis of the newly acquired apartment complex? Her basis in the newly acquired apartment complex is

Explanation / Answer

1) Proceeds= $7900,000 FMV +$350,000 cash+$500,000 mortgage $     8,750,000 Less:-Basis in old $     8,500,000 Realized gain $        250,000 2) Gain is recognized to the extent the lesser of boot received or gain realized. Cash $350000+$500,000 mortgage $        850,000 3) Basis in old $     8,500,000 Add: gain $        850,000 Boot received $        850,000 Basis in new $     8,500,000 or FMV of new $     7,900,000 Deffered gain ($850000-$650000) $        600,000 Basis in new $     8,500,000

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