Sanjay exchanges a warehouse he uses in his rental business for a building owned by Sidney which he will use in his rental business.The adjusted basis of Sanjay's building is $320,000 and the fair market value is $500,000.The adjusted basis of Sidney's warehouse is $160,000 and the fair market value is $500,000.Which of the following statements is correct?

Question

Quizplus · Accepted Answer

Sanjay is exchanging property of like-kind, so this is a non-taxable exchange under Section 1031 of the Internal Revenue Code. Sanjay's recognized gain is $0 and his basis for the warehouse received is the same as the adjusted basis of the building he exchanged, which is $320,000. Sidney's basis for the building received will be the same as the adjusted basis of the warehouse he exchanged, which is $160,000.

Sanjay Exchanges a Warehouse He Uses in His Rental Business