Holiday exchanged an office building used in its business for a different office building

Accounting Dec 15, 2020

Holiday exchanged an office building used in its business for a different office building. Holiday originally purchased the building for $80,000 and it had an adjusted basis of $53,000 at the time of the exchange. The office building had a fair market value of $62,000. Holiday also received $7,000 of cash in the transaction.

Realized Gain/Loss?

Recognized Gain/Loss?

Basis in New Asset?

Expert Solution

a. Computation of Realized Gain/Loss:

Realized gain = Fair market value + Cash - Adjusted basis

= $62,000 + $7,000 - $53,000

= $16,000

b. Computation of Recognized Gain/Loss:

Recognized gain = Fair market value of the boot or Realized gain Which ever is lower (7000 & 16000)

Recognized gain = $7,000

c. Computation of Basis in New Asset:

Rental house basis = Office building + Gain recognized - Fair market value of boot received

= $53,000 +$7,000 - $7,000

=$53,000

Archived Solution

Unlocked Solution

You have full access to this solution. To save a copy with all formatting and attachments, use the button below.

Already a member? Sign In

Important Note: This solution is from our archive and has been purchased by others. Submitting it as-is may trigger plagiarism detection. Use it for reference only.

For ready-to-submit work, please order a fresh solution below.

Or get 100% fresh solution

Get Custom Quote