Rolf exchanges an office building worth $150,000 for investment land worth $175,000.He also provided stock worth $25,000.Rolf's adjusted basis in the building and stock is $130,000 and $11,000,respectively.How much gain will Rolf recognize on the exchange?
A)$0
B)$14,000
C)$20,000
D)$34,000

Question

Quizplus · Accepted Answer

To calculate the gain recognized on the exchange, we need to determine the total value received by Rolf in the exchange and then subtract his adjusted basis.

The total value received by Rolf is $175,000 (value of investment land) + $25,000 (value of stock) = $200,000.

Rolf's adjusted basis is $130,000 (building) + $11,000 (stock) = $141,000.

Therefore, the gain recognized is $200,000 - $141,000 = $59,000.

However, Rolf is using a like-kind exchange, which allows him to defer recognition of the gain, meaning he recognizes $0 gain at this time. The adjusted basis of the investment land and stock will be $141,000, which is the adjusted basis of the building and stock transferred.

Rolf Exchanges an Office Building Worth $150,000 for Investment Land