1 Bob owned a duplex used as rental property The duplex had

1. Bob owned a duplex used as rental property. The duplex had an adjusted basis to Bob of $86,000 and a fair market value of $300,000. Bob transferred the duplex to his brother, Carl, in exchange for a triplex that Carl owned. The triplex had an adjusted basis to Carl of $279,000 and a fair market value of $300,000. Two months after the exchange, Carl sold the duplex to his business associate to whom he was not related for $312,000. How much, if any, gain or loss did Carl recognize with respect to the sale by Carl two months after the transaction with Bob?
a. No gain or loss was recognized.
b. $11,000 gain was recognized.
c. $12,000 gain was recognized.
d. None of the above.

2. Assume the same facts as in Question 37, except that Carl sold the duplex to the business associate more than two years after the exchange with Bob. Without taking into consideration any changes to the adjusted basis of the property subsequent to the exchange with Bob (such as for depreciation), how much, if any, gain or loss did Bob recognize with respect to the exchange with Carl?

a. No gain or loss was recognized.
b. $11,000 gain was recognized.
c. $214,000 gain was recognized.
d. The transfer by Bob to Carl is a gift.
e. $21,000.

3. Under the facts of Question 37, what is Bob’s basis in the triplex?
a. $86,000.
b. $279,000.
c. $300,000.
d. $312,000.

4. Assume the same facts as Question 37, except that Carl sold the duplex to his business associate more than two years after the exchange with Bob. Without taking into consideration any changes to the adjusted basis of the property subsequent to the exchange with Bob (such as for depreciation), how much, if any, is Carl’s recognized gain with respect to these transactions?

a. No gain or loss on the exchange with Bob, and $12,000 gain on the subsequent sale.
b. $11,000 gain on the exchange with Bob, and $12,000 gain on the subsequent sale.
c. $12,000 gain on the exchange with Bob, and $279,000 on the subsequent sale.
d. None of the above.

please explain answer. tk

Solution

Given data:

Duplex adjusted = 86000$

Sold duplex = 312000$

Fair market value = 300000$

Recognized gain = 12000$

Requried :

1. Gain or loss recognized?

2.Gain or loss recognized with exchange?

3. adjust basis?

4.No gain or loss on the exchange with Bob, and $12,000 gain on the subsequent sale.?

solution:

1. Gain = Fair market Valve - consideration

= 312000-300000

= 12000$

Therefore gain recognized = 12000$

2. Gain = adjusted basis - fair market valuve

= 300000 - 86000

= 214000$

Therefore gain recognized = 214000$

3.Fair market value of the property was adjusted basis

= 300000$

4.No pick up or misfortune on the trade with Bob, and $12,000 pick up on the resulting deal

beacuse both the property has the same fmv and on ensuing deal

= 312000-300000

= 12000$