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Amount of gain realized by Kevin on the property exchange

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Kevin exchanges an office building used in business for one owned by Charlene. The FMV of Kevin's building is $280,000 (basis $150,000) and it is subject to a mortgage of $50,000, which is assumed by Charlene. Kevin receives $30,000 cash and Charlene's office building, which has a FMV of $200,000 (basis of $180,000).

a. What is the amount of gain realized by Kevin?
b. What is the amount of gain recognized by Kevin?
c. What is the basis of the new building to Kevin?

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Solution Preview

a. Kevin will have a realized gain of $130,000 calculated as property received of $200,000 + cash of $30,000 (boot) plus transfer of liability of $50,000 = 280,000
Less basis in building transferred $150,000
Realized gain $130,000

b. Kevin will recognize gain only to the extent of non like kind property: $30,000 cash + $50,000 of debt transferred ...

Solution Summary

The solution explains the concepts and calculates the answers for gain realized, recognized and the basis of the new building.

$2.19