The City of Greenville condemned 300 acres of Kayla's farmland.Kayla's land was worth $250,000 and her basis was $62,500.In payment to Kayla,the city gave Kayla 500 acres of similar land.An appraisal indicated that the land Kayla received was worth $265,000.What is Kayla's recognized gain or loss on the involuntary conversion and what is her basis in the land received?

Question

Quizplus · Accepted Answer

There is no recognized gain or loss on involuntary conversions if the property is replaced with property of "like-kind" and similar in use. In this case, the 500 acres of land received is of similar quality to the land that was condemned, and thus there is no gain or loss to report. Kayla's basis in the new land is equal to her basis in the old land, so her basis in the 500 acres of land received is $62,500.

The City of Greenville Condemned 300 Acres of Kayla's Farmland