Joe exchanged his personal-use residence (House 1, FMV = $600,000) with Betty. Joe purchased the residence...
Joe exchanged his personal-use residence (House 1, FMV = $600,000) with Betty. Joe purchased the residence one year ago for $348,000. Joe paid $2,000 in acquisition costs to purchase the residence.
In the exchange, Betty gave Joe a vacation house (House 2, FMV = $600,000). Betty originally purchased the vacation house for $100,000.
What is Joe's gain or loss recognized as a result of the exchange?
What is Joe's basis in House 2 immediately after the exchange?
Homework Answers
1. Joe's loss = 348000+2000 - 100000 = $250000
2. Joe' basis after exchange = Fair market value of the acquired property = $600,000
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