Joseph exchanged land tax basis of $36,000),that he had held for 4 years as an investment,for similar land valued at $40,000 which was owned by Adrian.In connection with this transaction,Adrian assumed Joseph's $12,000 mortgage.As a result of this transaction Joseph should report a long-term capital gain of:

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Joseph's realized gain is calculated as the fair market value of the land received ($40,000) plus the mortgage assumed by Adrian ($12,000), minus the basis of the land given up ($36,000). This results in a gain of $16,000. However, since this is a like-kind exchange, the recognized gain is limited to the boot received, which is the mortgage assumed by Adrian ($12,000). Thus, Joseph should report a long-term capital gain of $12,000.

Joseph Exchanged Land Tax Basis of $36,000),that He Had Held