Lorch Company exchanged an old asset with a $120,700 tax basis and a $155,000 FMV for a new asset with a $142,250 FMV and $12,750 cash.
If the old asset and the new asset are like-kind properties, compute Lorch's realized and recognized gain and Lorch's tax basis in the new asset.How would your answers change if the new asset is worth only $116,000, and Lorch received $39,000 cash in the exchange?

Question

Quizplus · Accepted Answer

The Answer of Lorch Company exchanged an old asset with a $120,700 tax basis and a $155,000 FMV for a new asset with a $142,250 FMV and $12,750 cash.
If the old asset and the new asset are like-kind properties, compute Lorch's realized and recognized gain and Lorch's tax basis in the new asset.How would your answers change if the new asset is worth only $116,000, and Lorch received $39,000 cash in the exchange?

Lorch Company Exchanged an Old Asset with a $120,700 Tax