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:
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)
