Johnson Inc. and C&K Company entered into an exchange of real property. Here is the information for the properties to be exchanged. $\begin{array}{lrrr}
&\text { Johnson}&\text { C} \&\text {K} \
\text { FMV } & \$ 900,000 & \$ 675,000 \
\text { Adjusted tax basis } & 593,000 & 462,000 \
\text { Mortgage } & 200,000 & -0-0-1
\end{array}$ Pursuant to the exchange, C&K paid $25,000 cash to Johnson and assumed the mortgage on the Johnson property. Compute Johnson's gain recognized on the exchange and its tax basis in the property received from C&K.

Question

Quizplus · Accepted Answer

Johnson's gain recognized is $225,000, calculated as the sum of the cash received ($25,000) and the mortgage assumed by C&K ($200,000). The basis in the C&K property is $593,000, which is the adjusted tax basis of the Johnson property minus the gain recognized.

Johnson Inc Pursuant to the Exchange, C&K Paid $25,000 Cash to Johnson