Question

Daniela Fletcher owns undeveloped land (adjusted basis of $80,000 and fair market value of $92,000) on the East Coast. On January 4, 2020, she exchanges it with Lisa Martin (an unrelated party) for undeveloped land on the West Coast and $3,000 cash. Lisa has an adjusted basis of $72,000 for her land, and its fair market value is $89,000. Because the real estate market on the East Coast is thriving, on September 1, 2021, Lisa sells the land she acquired for $120,000.
a. On January 4, 2017, Tanya's realized gain for the West Coast land is $__________ her adjusted basis is$_______, her recognized gain is $ X__________
b. On January 4, 2017, Martin's realized gain for the East Coast land is $_______ adjusted basis is $________
c. Martin's realized gain from the September 1, 2018, sale is .His recognized gain from the September 1, 2018 sale is $_________

Answer 1

Explanation:

a.

for tanya:

realized gain

= (89000+3000) - adjusted basis of 80000

= 92000 - 80000

= $12,000

recognized gain:

this is what she received = $3000

adjusted basis:

= realized gain - recognized gain

= 12000 - 3000

= $9,000

b. for martins;

realized gain

= 92000 - his adjusted basis

= 92000 - (72000 + 3000)

= 92000 - 75000

= $17000

adjusted basis

= $92000 - 17000

= $75,000

c. recognized gain for martin

amount sold - adjusted basis

= 120000 - 75000

= $45000