Eduardo owns land held for investment purposes that has a basis of $250,000.He exchanges the land,plus $40,000 of cash,for a warehouse he will hold as rental property.The warehouse is worth $410,000,but is subject to a mortgage of $70,000 which Eduardo will assume.The gain realized by Eduardo is

Question

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The gain realized is calculated as the fair market value of the property received ($410,000) plus the mortgage assumed ($70,000), minus the basis of the land given up ($250,000) and the cash paid ($40,000). This results in a gain of $50,000.

Eduardo Owns Land Held for Investment Purposes That Has a Basis