Investor exchanges a building (FMV 0,000, Basis 0,000) for another building (FMV 0,000) and ,000 cash. What is the realized gain, recognized gain, and basis in the new building?

Answer options:

Realized: 0,000; Recognized: 0; Basis: 0,000

Realized: 0,000; Recognized: ,000; Basis: 0,000

Realized: 0,000; Recognized: 0,000; Basis: 0,000

Realized: 0,000; Recognized: ,000; Basis: 0,000

How to approach this question

1. Realized Gain = Total FMV Received - Old Basis. 2. Recognized = Lesser of Realized or Boot. 3. New Basis = Old Basis + Recognized - Boot Received.

Full Answer

B.Realized: 0,000; Recognized: ,000; Basis: 0,000✓ Correct

Realized gain is 0,000. Recognized gain is limited to boot received (,000). Basis in new property = Adjusted Basis of old (,000) - Boot received (,000) + Gain recognized (,000) = 0,000.

Common mistakes

Recognizing the full realized gain or miscalculating the new basis.

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