Moss exchanges a warehouse for a building he will use as an office building.The adjusted basis of the warehouse is $600,000 and the fair market value of the office building is $350,000.In addition, Moss receives cash of $150,000.What is the recognized gain or loss and the basis of the office building?
A)$0 and $350,000.
B)$0 and $450,000.
C)($150,000) and $300,000.
D)($200,000) and $350,000.

Question

Quizplus · Accepted Answer

The recognized gain is $0 because in a like-kind exchange, gain is not recognized unless cash is also received. The basis of the office building is $450,000, calculated as the adjusted basis of the warehouse ($600,000) minus the cash received ($150,000), since the fair market value of the office building is not directly relevant to the basis calculation in this context.

Moss Exchanges a Warehouse for a Building He Will Use