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Recognized gain and basis for land exchanged by Eunice Jean

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Eunice Jean exchanges land held for investment located in Rolla, Missouri, for land to be held for investment located near Madrid, Spain. Her basis for the land given up is $250,000 and the fair market value of the land received is $350,000. Eunice Jean also receives cash of $15,000.

a. What is Eunice Jean's recognized gain?

b. What is her basis for the land received?

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Solution Summary

The solution explains the code section of tax law that pertains to this transaction, and then calculates the recognized gain and the basis of the land received.

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Section 1031 of the Internal Revenue Code governs exchanges of like-kind property. An exchange for foreign property is not considered like-kind. Like-kind exchanges are limited to property within the 50 states and the ...

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