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Cloud [144]
2 years ago
7

Firm ML, a non-corporate taxpayer, exchanged residential rental property plus $15,000 cash for 20 acres of investment land with

a $200,000 FMV. ML used the straight-line method to compute depreciation on the rental property.
a. Assuming that ML's exchange was negotiated at arm's length, what is the FMV of the rental property?
b. If the adjusted basis of the rental property is $158,000, compute ML's realized and recognized gain. What is the character of the recognized gain?
c. Compute ML's basis in the 20 acres of investment land.
Business
1 answer:
Grace [21]2 years ago
7 0

Answer:

A)  $215,000

B)  realized gain = $57,000

    recognized gain = $15,000

C) $158,000

Explanation:

cash exchanged with the rental property ( boot ) = $15,00

A) Assuming ML's exchange is done at arm's length

FMV of property = $200,000 + $15,000 = $215,000

B) Taking adjusted basis of rental property = $158,000

ML's realized gain = FMV of property at arm's length - adjusted basis

                              = $215000 - $158000 = $57,000

ML's recognized gain = $15,000

The character of the recognized gain is that it will be lower of the boot amount or realized gain and this is because no gain or loss is registered/recognized in the transaction ( exchange ) except with the boot received

C) Determine ML's basis in the 20 acres of investment land

= $158,000

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$20000 gain for John Corporation and $10000 loss for Bass Corporation.

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3 years ago
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The characteristic of value that is represented here is <u>C. Situs.</u>

<h3>What is Situs?</h3>

Situs refers to the location of the property in legal terms.  The location of an asset adds or subtracts value from the property. Some properties are located in urban areas where the demand is much more than in suburbs or rural areas.  Such properties attract equivalent values based on their locations.

<h3>Answer Options:</h3>

A. Scarcity

B. Nolo Contendere

C. Situs

D. Caveat Emptor

Thus, the characteristic of value represented in this scenario is not scarcity, nolo contendere, or caveat emptor, but <u>Option C. Situs.</u>

Learn more about the location of a real estate at brainly.com/question/26010601

7 0
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Therefore, for computing the cash will Patricia receive from this loan we simply applied the above formula.

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