Basis of realty acquired
3. Firm PO and Corporation QR exchanged the following business real estate:
If PO’s adjusted basis in Marvin Gardens was $403,000, compute PO’s realized gain, recognized gain,
and basis in Boardwalk.
If QR’s adjusted basis in Boardwalk was $78,000, compute QR’s realized gain, recognized gain, and
basis in Marvin Gardens.
On June 2, 2017, a tornado destroyed the building in which FF operated a fast-food franchise. FF’s adjusted
basis in the building was $214,700. In each of the following cases.
Determine FF’s recognized gain or loss on this property disposition and FF’s basis in the replacement
building. Assume that FF would elect to defer gain recognition when possible. On September 8, 2017,
FF received a $250,000 reimbursement from its insurance company. On August 10, 2018, it completed
construction of a replacement building for a total cost of $300,000.