Emily owns land for investment purposes that has a FMV of $300,000 (basis of $260,000).She exchanges the land,plus $40,000 cash,for a warehouse to be used in her business.The warehouse is worth $420,000,but is subject to a mortgage of $80,000 which Emily will assume.The gain realized by Emily on the exchange is
A)$40,000.
B)$80,000.
C)$120,000.
D)$160,000.

Question

Quizplus · Accepted Answer

A)The taxpayer receives a warehouse worth $420,000,but in exchange gives up land with an adjusted basis of $260,000 and $40,000 of cash and assumes an $80,000 liability,resulting in the $40,000 realized gain.

Emily Owns Land for Investment Purposes That Has a FMV