Richard exchanges a building with a basis of $35,000, and subject to a liability of $25,000, for land with a FMV of $50,000 owned by Bill. Bill takes the building subject to the liability. What is the amount of Richard's realized gain?

Question

Quizplus · Accepted Answer

Richard's realized gain is calculated as the fair market value of the land received ($50,000) plus the liability assumed by Bill ($25,000) minus Richard's basis in the building ($35,000). Thus, the realized gain is $50,000 + $25,000 - $35,000 = $40,000.

Richard Exchanges a Building with a Basis of $35,000, and Subject