AC553_W7_Solution11_29

AC553_W7_Solution11_29 - Problem 11-29 Solution Like-Kind...

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1 Problem 11-29 Solution Like-Kind Exchanges: Basis and Gain or Loss Ben Bonn and Lester Lambert exchange business machines. Ben’s adjusted basis in his property is $3,200, and the fair market value is $4,500. Lester’s property has an adjusted basis of $1,700 and a fair market value of $2,000. Lester also gives Ben $2,500 cash. What is Ben’s realized and recognized gain and basis in the new property? What is Lester’s realized and recognized gain and basis in the new property? Solution: Ben's realized and recognized gain is $1,300 and the basis of the new machine is $2,000. FMV of property received ($2,000 + $2,500) . . . . . . . . . . . . . . . . . . . . $ 4,500 Less: Adjusted basis of property given up . . . . . . . . . . . . . . . . . . . . . . . 3,200 Gain realized . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . … . . . . . $ 1,300 Gain recognized . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,300 Gain is recognized by Ben to the extent of boot received but not to exceed realized
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This note was uploaded on 02/21/2012 for the course ACCOUNTING 553 taught by Professor James during the Spring '12 term at DeVry Phoenix.

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