Question

Required information (The following information applies to the questions displayed below) Metro Corp. traded Land A for Land B. Metro originally purchased Land A for $50,000 and Land A's adjusted basis was $25,000 at the time of the exchange. What is Metro's realized gain or loss, recognized gain or loss, and adjusted basis in Land B in each of the following alternative scenarios? (Loss amounts should be indicated by a minus sign. Input all other amounts as positive values. Leave no answer blank. Enter zero is applicable.) a. The fair market value of Land A and of Land B is $40,000 at the time of the exchange. The exchange does not qualify as a like-kind exchange. Answer is complete but not entirely correct. Realized gain Recognized gain Adjusted basis in Land B $ $ 25,000 15,000 40,000

Answer 1

a.

PARTICULARS	AMOUNT
Fair market value of Land B	$40,000
LESS:
Adjusted Basis Land A	-$25,000
Realized and recognized gain(loss)	$15,000
Adjusted Basis in Land B is the fair market value	$40,000

Hence, Realized Gain will be $15,000

b.

Computation of Realized and Recognized Gain or Loss and Adjusted basis in Land B as,

PARTICULARS	AMOUNT
Amount Realized from Land B	$40,000
ADD: Amount Realized from cash	$0
Total Amount Realized	$40,000
LESS: Adjusted basis in Land A	-$25,000
Realized gain	$15,000
Recognized Gain, (lessor of amount realized in cash or realized gain(Lessor of 0 or 15,000)	$0
Defereed Gain(15000-0)	$15,000
Adjusted basis in Land B(40,000-15,000)	$25,000

c. Computation of realized and recognized gain or loss and adjusted basis in Land B

PARTICULARS	AMOUNT
Amount Realized from Land B	$40,000
ADD: Amount Realized fromboot(cash)	$0
Total Amount Realized	$40,000
LESS: Adjusted basis in Land A(25,000+5,000)	-$30,000
Realized gain	$10,000
Recognized Gain, (lessor of amount realized in cash or realized gain(Lessor of 0 or 10,000)	$0
Defereed Gain(10,000-0)	$10,000
Adjusted basis in Land B(40,000-10,000)	$30,000

d. Computation of realized and recognized gain or loss and adjusted basis in Land B

PARTICULARS	AMOUNT
Amount Realized from Land B	$40,000
ADD: Amount Realized fromboot(cash)	$5,000
Total Amount Realized	$45,000
LESS: Adjusted basis in Land A(50,000-25,000)	-$25,000
Realized gain	$20,000
Recognized Gain, (lessor of amount realized in cash or realized gain(Lessor of 5,000 or 20,000)	$5,000
Defereed Gain(20,000-5,000)	$15,000
Adjusted basis in Land B(40,000-15,000)	$25,000

hope you got the answer, please comment for any clarification

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