Question

Steve Stromm transfers an office building with an adjusted basis of $200,000 and a fair market value of $300,000 for Andrew Astor's office building (adjusted basis $190,000) with a fair market value of $250,000. Steve's mortgage of $120,000 is assumed by Andrew whose mortgage of $70,000 is assumed by Steve. What is Andrew's Recognized Gain?

Answer 1

Answer:

The correct answer is "10,000".

Explanation:

The given values are:

Fair market value,

= $300,000

Andrew's adjusted basis,

= $190,000

Its fair market value,

= $250,000

Steve's mortgage,

= $120,000

Andrew's mortgage,

= $70,000

According to the question,

Steve is losing out,

= $300000 - 200000 + 70000$

= $170,000$

Andrew is losing out,

= $250000 - 190000 + 120000$

= $180,000$

Now,

Steve gains the amount,

= $Andrew \ losing-Steve \ losing$

= $180,000 - 170,000$

= $10,000$

So that Andrew loses the same amount as Steve i.e.,

= 10,000