Answer:
The adjusted basis in the land after the exchange=-$10,000, meaning Baker realized a loss of $10,000 from the exchange
Explanation:
<em>Step 1: Determine the initial loss/gain in value of the building</em>
initial loss/gain=original purchase price-adjusted basis
where;
original purchase price=$50,000
adjusted basis=$30,000
replacing;
initial loss/gain=50,000-30,000=$20,000
initial loss in value=-$20,000
<em>Step 2: Determine the loss or gain from the exchange</em>
loss/gain=35,000-30,000=$15,000
gain=$15,000
Step 3: Determine other additional costs
Costs=loss=-$5,000
<em>Step 4: Determine the net gain/loss</em>
net gain/loss=-20,000+(15,000)+(-5,000)=-$10,000
The adjusted basis in the land after the exchange=-$10,000, meaning Baker realized a loss of $10,000 from the exchange
