James corporation exchanges a building (fair market value = $800,000, adjusted basis = $600,000) that has a $100,000 mortgage for another building owned by Pete Corporation (fair market value = $1,100,000, adjusted basis = $600,000) that is encumbered by a $400,000 mortgage.Each party assumes the mortgage on the building received.What are James's and Pete's realized gains on this exchange, respectively?
A)$200,000, $500,000
B)$200,000, $600,000
C)$500,000, $600,000
D)$500,000, $500,000

Question

Quizplus · Accepted Answer

James's realized gain is $200,000 ($800,000 - $600,000). Pete's realized gain is $500,000 ($1,100,000 - $600,000).

James Corporation Exchanges a Building (Fair Market Value = $800,000