In-class Example #59 in Book (Ch.11)
Chapter 11 - Like-Kind Exchanges
Adapted from the text (Problem 60):
Metro Corp. traded building A for building B. Metro originally purchased building A for $500,000 and building A's
adjusted basis was $250,000 at the time of the exchange. What is Metro's realized gain or loss, recognized gain or
loss, and adjusted basis in building B in each of the following alternative scenarios?
a) The fair market value of building A and of building B is $400,000. The exchange does not qualify as a
like-kind exchange.
Realized:
Recognized:
Basis in B:
b) The fair market value of building A and of building B is $400,000. The exchange qualifies as a like-kind
exchange.
Realized:
Recognized:
Basis in B:
c) The fair market value of building A is $350,000 and of building B is valued at $400,000. Metro
exchanges building A and $50,000 cash for building B. Building A and building B are like-kind property.
Realized:
Recognized:
Basis in B:
d) The fair market value of building A is $450,000 and of building B is valued at $400,000. Metro
exchanges building A for $50,000 cash and building B. Building A and building B are like-kind property.
Realized:
Recognized:
Basis in B:
e) The fair market value of building A is $300,000 and of building B is valued at $400,000. Metro
exchanges building A and stock worth $100,000 for building B. Metro has a basis of $70,000 in the
stock that was given in the transaction. Building A and building B are like-kind property.
Realized:
Recognized:
Basis in B: