Lily exchanges a building she uses in her rental business for a building owned by Kendall, her brother, which she will use in her rental business.The adjusted basis of Lily's building is $120,000 and the fair market value is $170,000.Which of the following statements is correct?
A)Lily's recognized gain is $50,000 and her basis for the building received is $120,000.
B)Lily's recognized gain is $50,000 and her basis for the building received is $170,000.
C)Lily's recognized gain is $0 and her basis for the building received is $120,000.
D)Lily's recognized gain is $0 and her basis for the building received is $170,000.
E)None of the above is correct.

Question

Quizplus · Accepted Answer

This transaction qualifies as a like-kind exchange under Section 1031 of the Internal Revenue Code, which means that Lily's recognized gain is $0, and her basis for the building received is the same as the adjusted basis of the building she exchanged, which is $120,000.

Lily Exchanges a Building She Uses in Her Rental Business