BUSA427_Chapter11.docx - Chapter 11 Ch 11 Question 21 a...

Chapter 11
Ch. 11: Question 21
a. Leonard and Linda’s excluded gain is $220,000 since it does not exceed the $500,000
limit for married filing jointly. They must recognize $220,000. This can be calculated as
follows:
$100,000 Cost $350,000 Realized Amount
$ 30,000 Improvements ($130,000) Basis
$130,000 Basis $220,000 Gain
b. Leonard and Linda’s excluded gain is $370,000 since it does not exceed the $500,000
limit for married filing jointly. They must recognize $370,000. This can be calculated as
follows:
$100,000 Cost $700,000 Realized Amount
$200,000 New Purchase ($330,000) Basis
$ 30,000 Improvements $370,000 Gain
$330,000 Basis
c. Leonard and Linda would recognize a $50,000 loss. This can be calculated as follows:
$100,000 Cost $ 80,000 Realized Amount
$ 30,000 Improvements ($130,000) Basis
$130,000 Basis $ 50,000 Loss
Ch. 11: Question 29
The exchanges that qualify as a like-kind exchange are:
a. Unimproved land for warehouse
b. Factory for apartment building
e. Computer for a printer

Ch. 11: Question 33
a. Emma’s realized gain is $5,000 and her recognized gain is $5,000. Her basis in the new
property is $23,000. This can be calculated as follows:
$23,000 FMV $25,000 Old Basis
$ 7,000 Boot ($ 7,000) Boot
$30,000 $ 5,000 Gain
($25,000)