On October 1,Paula exchanged an apartment building (adjusted basis of $375,000 and subject to a mortgage of $125,000)for another apartment building owned by Nick (fair market value of $550,000 and subject to a mortgage of $125,000).The property transfers were made subject to the mortgages.What amount of gain should Paula recognize?
A)$0
B)$25,000
C)$125,000
D)$175,000
E)None of these

Question

Quizplus · Accepted Answer

Amount realized:
Apartment building (FMV)$550,000
Mortgage of transferor 125,000 $675,000
(Paula)
Adjusted basis:
Apartment building Mortgage $375,000 (500,000)
of transferee (Nick)125,000
Realized gain $ 175,000
Recognized gain (net boot
received equals net boot
given)$ -0-

On October 1,Paula Exchanged an Apartment Building (Adjusted Basis of $375,000