Dena owns 500 acres of farm land in southeastern Maryland.Her adjusted basis for the land is $480,000 and there is a $400,000 mortgage on the land.She exchanges the land for an office building owned by Chris in Newark,New Jersey.The building has a fair market value of $900,000.Chris assumes Dena's mortgage on the land.What is the amount of Dena's recognized gain or loss on the exchange?

Question

Quizplus · Accepted Answer

Amount realized:
Office building (FMV)$900,000
Mortgage on land 400,000 $1,300,000
Adjusted basis (480,000)
Realized gain $ 820,000
Recognized gain $ 400,000
The mortgage is treated as boot.The recognized gain is the lesser of the realized gain ($820,000)or the boot received of $400,000.

Dena Owns 500 Acres of Farm Land in Southeastern Maryland