Ashley owns 200 acres of farm land is southeastern Virginia.Her adjusted basis for the land is $525,000 and there is a $390,000 mortgage on the land.She exchanges the land for an office building owned by Chris in Newark,New Jersey.The building has a fair market value of $450,000.Chris assumes Ashley's mortgage on the land.What is the amount of Ashley's recognized gain or loss on the exchange?

Question

Quizplus · Accepted Answer

To calculate the recognized gain or loss, we need to start with the equation: realized amount - adjusted basis. 
The realized amount in this case is the fair market value of the building, which is $450,000. 
The adjusted basis of the land is $525,000. 
We then subtract the mortgage on the land, which Chris assumes, from the adjusted basis: $525,000 - $390,000 = $135,000. 
Therefore, the recognized gain is: $450,000 - $135,000 = $315,000. So, the answer is B.

Ashley Owns 200 Acres of Farm Land Is Southeastern Virginia