Question

What happens on the assumption of liabilities of acquired property in a like-kind exchange?

Answer 1

If the taxpayer liabilities are assumed then the net aggregate amount of that liability is treated as cash received by (Sec. 1031(d) and Regs. Sec. 1.1031(b)-1(c)), on the other hand if the taxpayer transfers the property which is subjected to liability the taxpayer will have the gain realized to the amount of the liability to which property is subject.

For example, if you transfer property with an adjusted basis of $100,000 and it is subject to a mortgage of $160,000, you would recognize a gain of $60,000.