Karen owns a commercial office building with a fair market value of $140,000. She purchased the building as an investment for $102,000 in 2003. She has claimed $18,000 in depreciation deductions. Karen trades the building for an apartment complex. The apartment complex has a value of $140,000, and the exchange qualifies for like-kind deferral treatment. What is Karen's basis in the apartment complex?
A)$- 0 -
B)$ 58,000
C)$ 84,000
D)$140,000
E)$198,000

Question

Quizplus · Accepted Answer

Under Section 1031, the tax basis in the new property equals the tax basis in the old property, minus any realized gain. Karen's tax basis in the office building is $102,000 - $18,000 = $84,000. Since she is exchanging it for property of equal value, there is no realized gain, so her basis in the apartment complex will also be $84,000.

Karen Owns a Commercial Office Building with a Fair Market