Kevin exchanges an office building used in his business for another office building worth $200,000 plus $30,000 cash. The FMV of Kevin's old building is $280,000 (basis $150,000) and it is subject to a mortgage of $50,000. The mortgage is assumed by the other party.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?
What will be an ideal response?
| a. | Property received: |
| Office building (FMV) | $200,000 |
| Cash | 30,000 |
| Debt assumed by other party | 50,000 |
| Total | $280,000 |
| Minus: Basis of office building given up: | (150,000) |
| Gain realized | $130,000 |
| b. | This is a qualifying like-kind exchange. Gain is recognized to the extent of boot received- |
| c. | $150,000 determined as follows: |
(2) $150,000 basis of property exchanged - $80,000 boot received + $80,000 gain recognized.
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