The City of Greenville condemned 300 acres of Kayla's farmland.Kayla's land was worth $250,000 and her basis was $62,500.In payment to Kayla,the city gave Kayla 500 acres of similar land.An appraisal indicated that the land Kayla received was worth $265,000.What is Kayla's recognized gain or loss on the involuntary conversion and what is her basis in the land received?

Question

Quizplus · Accepted Answer

Kayla does not recognize any gain because the transaction is an involuntary conversion of property, where the property received is similar or related in service or use to the property converted. Her basis in the new land is the same as her basis in the old land, $62,500, because she did not recognize any gain.

The City of Greenville Condemned 300 Acres of Kayla's Farmland