Roscoe receives real estate appraised at $200,000 and cash of $10,000 from Cathy in exchange for Roscoe's investment realty with a basis of $170,000. What is his basis in the new real estate?

Question

Quizplus · Accepted Answer

Roscoe's basis in the new real estate is determined by his original basis in the property he exchanged, which was $170,000. In a like-kind exchange, the basis of the property given up is transferred to the new property, adjusted for any additional cash received or paid. The cash received does not change the basis of the new property; it would only trigger recognition of gain to the extent of the cash received. Therefore, his basis in the new real estate remains $170,000.

Roscoe Receives Real Estate Appraised at $200,000 and Cash of $10,000