Maud exchanges a rental house at the beach with an adjusted basis of $225,000 and a fair market value of $200,000 for a rental house at the mountains with a fair market value of $180,000 and cash of $20,000. What is the recognized gain or loss?
A) $0
B) $20,000
C) ($20,000)
D) ($25,000)
E) None of the above

Question

Quizplus · Accepted Answer

In a like-kind exchange, the recognized gain is the lesser of the realized gain or the boot received. Here, the realized loss is $25,000 ($200,000 - $225,000), and the boot received is $20,000. Since there is no gain to recognize and losses are not recognized in like-kind exchanges, the recognized gain or loss is $0.

Maud Exchanges a Rental House at the Beach with an Adjusted