Answer:
a). Mary’s realized gain is $350,000
b). Mary’ recognized gain is $200,000
c). Mary’s basis of the newly acquired office building is $680,000
Explanation:
a) In order to calculate Mary’s realized gain/ loss we would have to make the following calculation:
Amount realized= [$230,000 (cash) + $880,000 (office building) + $320,000 (mortgage)] = $1,430,000
Adjusted basis of apartment house given up (1,080,000)
herefore, Realized gain = 1,430,000- $1,080,000= $350,000
b) In order to calculate Mary’ recognized gain/loss we would have to make the following calculation:
b) Recognized gain = $550,000 [$230,000 (cash) + $320,000 (mortgage assumed by Dave is treated as boot received);
Lower of boot received of $550,000 or realized gain of $350,000.
So there is a Postponed gain of = $200,000.
c) To calculate Mary’s basis of the newly acquired office building we would have to make the following calculation:
New basis = [$880,000 (fair market value of office building received)-$200,000 (postponed gain)].
=$680,000
