Sammy exchanges land used in his business in a like-kind exchange. The property exchanged is as follows: Property Surrendered Property Received
Adi. Basis FMV Adi. Basis FMV
Land $44,000 $60,000 $50,000 $43,000
Cash $5,000 $5,000
Liability on land $12,000 $12,000

The other party assumes the liability.

Required:
a. What is Sammy's recognized gain or loss?
b. What is Sammy's basis for the assets he received?

Answer and Explanation:

The computation is shown below:

a. For recognized gain or loss

= Equipment + land + liability on land - adjusted basis

= $43,000 + $5,000 + $12,000 - $44,000

= $16,000

It should be the lower amount of the boot received i.e. $12,000 + $5,000 i.e. $17,000 or the $16,000 so here the recognized gain is $16,000

b. Now the basis of the assets received is $5,000

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