XYZ Company enters into an exchange transaction with LMN Company. XYZ Company exchanges a building from one of its retail locations to LMN Company and ABC receives land to develop an amusement park. The building from ABC has a FMV of $365,000 and an original purchase price of $290,000 and depreciation taken of $60,000. The land from LMN has a basis and FMV of $265,000 and they give $100,000 cash to ABC.
1.Does this exchange qualify for a like-kind exchange treatment?
2.What is the realized gain on the exchange to ABC Company?
3.What is the recognized gain on the exchange to ABC Company?
4.What is the total basis in the property and cash received by ABC Company?
5.What is the recognized gain to LMN Company on the transaction?
6.What is the basis in the property received by LMN Company in the exchange?
Part 2:
Bill exchanges unimproved land with a $70,000 basis and marketable securities with a $20,000 basis for an eight-unit apartment building having a $170,000 FMV. The land and marketable securities are held by Wayne as investments, and the apartment building is held as an investment. The marketable securities have a $45,000 FMV. What is his realized gain, recognized gain, and the basis for the apartment building? Show your calculations.
Sample Solution