Question

Tab exchanges real estate used in his business along with stock for real estate to be held for investment. The stock transferred has an adjusted basis of $45,000 and a fair market value of $50,000. The real estate transferred has an adjusted basis of $85,000 and a fair market value of $190,000. The real estate acquired has a fair market value of $240,000.


Tab's realized gain is ?


His recognized gain is ?


The basis of the newly acquired real estate is ?

Answer 1

Answer:

Tab's realized gain = $110,000

Recognized gain = $5,000

The basis of the newly acquired real estate = $135,000

Explanation:

Data provided in the question:

The stock transferred has an adjusted basis = $45,000

Fair market value of stock = $50,000

The real estate transferred has an adjusted basis = $85,000  

Fair market value of real estate transferred  = $190,000

Fair market value real estate acquired = $240,000

Now,

Tab's realized gain

= Fair market value -  adjusted basis of real estate transferred - adjusted basis of stock transferred

= $240,000 - $85,000 - $45,000

= $110,000

Recognized gain

= Fair market value of stock -  Adjusted basis of stock transferred

= $50,000 - $45,000

= $5,000

The basis of the newly acquired real estate

= Fair market value real estate acquired - Deferred gain

also,

Deferred gain = realized gain - Recognized gain

=  $110,000 - $5,000

= $105,000

thus,

The basis of the newly acquired real estate

= $240,000 - $105,000

= $135,000