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Realized and recognized gain or loss in exchange

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Debbie Davis and Elizabeth Engels exchanged like-kind property. Debbie had an adjusted basis of $12,000 in her property (fair market value is $15,000). Elizabeth's property had an adjusted basis of $9,000, and a fair market value of $10,500, and Elizabeth gave Debbie $4,500 in cash. Determine Debbie's and Elizabeth's realized gain or loss, recognized gain or loss, and the basis in their new property.

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Solution Summary

This solution presents the resulting values for both Debbie and Elizabeth as a result of the exchange. The gain, realized and recognized) as well as the basis in the new property is calculated. The solution also includes the law with regard to like kind exchanges.

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See table attached.

Property Exchange Debbie Elizabeth

Fair market value 15,000 10,500
Boot (cash) received 0 4,500
Adjusted basis 12,000 9,000
Realized Gain 3,000 6,000
Recognized Gain 0 4,500
Basis in new property ...

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