Eunice Jean exchanges land held for investment located in Rolla, MO, for land to be held for investment located near Madrid, Spain. Her basis for the land given up is $450,000 and the fair market value of the land received is $500,000. Eunice Jean also receives cash of $45,000.
?
a.What is Eunice Jean’s recognized gain?b.What is her basis for the land received?
What will be an ideal response?
?
| a. | Amount realized ($500,000 + $45,000) | $545,000 |
| Adjusted basis | (450,000) | |
| Realized gain | $ 95,000 | |
| Recognized gain | $ 95,000 |
| Real property located in the United States (Rolla) exchanged for foreign real property (near Madrid) does not qualify as like-kind property. So the recognized gain is not limited to the boot received of $45,000. |
| b. | FMV of Madrid land | $500,000 |
| Less: Postponed gain ($95,000 – $95,000) | –0– | |
| Basis for Madrid land | $500,000 |
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