Brian owns a duplex used as rental property. The duplex has a basis of$84,000 and $380,000 FMV. He transfers the duplex to Carrie,his sister, in exchange for a triplex that she owns. The triplex has a basis of $280,000 and a $380,000 FMV. Two months after the exchange, Carrie sells the duplex to a business associate for $395,000.RequirementsDetermine:a.Brian'srealized and recognized gain on the exchange.b.Carrie'srealized and recognized gain on the exchange. Requirement a. DetermineBrian's realized and recognized gain on the exchange. Begin with the realized gain. First identify the formula, then enter the applicable amounts and calculate the realized gain. Amount realized (Brian)-Adjusted basis (duplex)=Realized gain $380,000-$84,000=$296,000DetermineBrian's recognized gain on the exchange. The recognized gain is $ .

Answered: Brian owns a duplex used as rental…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

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Brian owns a duplex used as rental property. The duplex has a basis of

$84,000 and $380,000 FMV. He transfers the duplex to Carrie,his sister, in exchange for a triplex that she owns. The triplex has a basis of $280,000 and a $380,000 FMV. Two months after the exchange, Carrie sells the duplex to a business associate for $395,000.

Requirements

Determine:

a.	Brian's realized and recognized gain on the exchange.
b.	Carrie's realized and recognized gain on the exchange.

Requirement a. Determine

Brian's realized and recognized gain on the exchange.

Begin with the realized gain. First identify the formula, then enter the applicable amounts and calculate the realized gain.

	Amount realized (Brian)	-	Adjusted basis (duplex)	=	Realized gain
	$380,000	-	$84,000	=	$296,000

Determine

Brian's recognized gain on the exchange.

The recognized gain is $

Expert Solution

Step 1Introduction

Suppose that there is no boot involved. A like-kind exchange is not taxable; that is, there is no recognized gain or loss to both parties on the exchange. The basis of a property received is equal to the basis of the property relinquisned_ The holding period of a property received is exactly the holding period of the property relinquished. In an exchange, realized gain is determined by subtracting the basis of the property relinquished from the fair market value (FMV) of the property received.

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