Maud exchanges a rental house at the beach with an adjusted basis of $225,000 and a fair market value of $200,000 for a rental house at the mountains with a fair market value of $180,000 and cash of $20,000.What is the recognized gain or loss?
A)$0
B)$20,000
C)($20,000)
D)($25,000)

Question

Quizplus · Accepted Answer

In a like-kind exchange, no gain or loss is recognized unless cash or other non-like-kind property (also known as "boot") is received. In this case, Maud receives $20,000 in cash, but because the fair market value of the property she gives up ($200,000) is more than the total fair market value of the property received ($180,000 plus $20,000 in cash = $200,000), there is no gain to be recognized. The entire transaction is treated as a like-kind exchange with no recognized gain or loss.

Maud Exchanges a Rental House at the Beach with an Adjusted