Patricia is a real estate investor. She exchanges land with an adjusted basis of $20,000 for $5,000 cash and land with a fair market value of $12,000.a.What is the gain or loss realized?b.What is the gain or loss recognized?c.What is the adjusted basis of the new office equipment?
What will be an ideal response?
| a. | There is a realized loss of $3,000 [($5,000 + $12,000) amount realized less $20,000 adjusted |
| b. | There is no loss recognized as it is a like-kind exchange. The loss is not recognized as the receipt |
| c. | The basis of the new land is $20,000 basis of property exchanged less $5,000 boot received or |
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