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