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19 April, 15:44

Carey exchanges real estate for other real estate in a qualifying like-kind exchange. Carey's basis in the real estate given up is $120,000, and the property has a fair market value of $165,000. In exchange for her property, Carey receives real estate with a fair market value of $100,000 and cash of $15,000. In addition, the other party to the exchange assumes a mortgage loan on Carey's property of $50,000. a. Calculate Carey's recognized gain, if any, on the exchange. $ b. Calculate Carey's basis in the property received.

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  1. 19 April, 16:43
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    a. $45,000

    b. $100,000

    Explanation:

    The computations are shown below:

    a. Recognized gain would be

    = Fair market value of real estate + cash received + mortgage loan - Carey's basis in the real estate given up

    = $100,000 + $15,000 + $50,000 - $120,000

    = $45,000

    b. For property received:

    = Carey's basis in the real estate given up - cash received - mortgage loan + recognized gain

    = $120,000 - $15,000 - $50,000 + $45,000

    = $100,000
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