Robert trades an office building located in Tennessee to John for an apartment complex located in New Jersey.Details of the two properties:
In addition,John pays Robert $3,000,000 cash as part of this transaction.What is the gain (loss)recognized by Robert in this transaction and what is his basis in the New Jersey property?
Gain Recognized Adjusted Basis

Question

Quizplus · Accepted Answer

To calculate the gain recognized, we need to compare the adjusted basis of the office building with the fair market value of the apartment complex plus the cash received.

The fair market value of the apartment complex is not given, so we cannot calculate the exact gain recognized. However, we know that Robert received $3,000,000 in cash as part of the transaction, which means that the fair market value of the apartment complex must have been less than $3,000,000 in order for Robert to recognize a gain.

Therefore, we can assume that the fair market value of the apartment complex was $2,000,000 or less (since $2,000,000 + $3,000,000 = $5,000,000, which is the adjusted basis of the office building).

If the fair market value of the apartment complex was $2,000,000, then the gain recognized would be $3,000,000 ($5,000,000 - $2,000,000).

If the fair market value of the apartment complex was less than $2,000,000, then the gain recognized would be even higher.

Therefore, the best answer is B: $5,000,000 gain recognized and $3,000,000 adjusted basis in the New Jersey property.

Robert Trades an Office Building Located in Tennessee to John