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?

Question

Quizplus · Accepted Answer

Rolf's total basis in the exchanged properties is $141,000 ($130,000 for the building + $11,000 for the stock). The total value of the properties received is $175,000. The gain is the difference between the value received and the basis, which is $34,000 ($175,000 - $141,000). However, since the exchange involves like-kind property (the building for the land), the gain recognized is limited to the value of the non-like-kind property (the stock), which is $25,000. Therefore, the recognized gain is $14,000 ($25,000 - $11,000 basis of the stock).

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