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Chapter 8 HW Solutions

Chapter 8 HW Solutions - 16 Like-Kind Exchange Solution...

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16. Like-Kind Exchange Solution: \$400,000 received - \$230,000 basis = \$170,000 gain realized but deferred. \$400,000 - \$170,000 deferred gain = \$230,000 basis in land received. 17. Like-Kind Exchange Solution: a. \$320,000 received - \$350,000 basis = \$30,000 loss realized but deferred. \$320,000 + \$30,000 deferred loss = \$350,000 basis of apartment building. b. Because Shawn must defer the loss, he would have been better off if he had sold the factory building and then purchased the apartment building with the proceeds. In that way, he could recognize the \$30,000 loss and reduce his taxes. 19. Like-Kind Exchange Solution: a. \$108,000 - \$16,000 cash - \$69,000 basis = \$23,000 realized gain. None of the \$23,000 gain is recognized. b. \$23,000 gain is deferred. Taylor gave boot; only the receipt of boot triggers gain. c. The basis of the large machine is \$85,000 (\$108,000 - \$23,000 deferred gain). (Alternative basis calculation: \$69,000 basis of machines surrendered + \$16,000 boot given + 0 gain recognized – 0 boot received = \$85,000.) 22. Like-Kind Exchange Solution: a. Realized and recognized gain/loss calculations Lab Kennels Wolman Developers \$900,000 -350,000 +200,000 FMV of property received Mtge assumed by Lab Kennel

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