Fran owns a commercial office building with a fair market value of $850,000. She purchased the building as an investment for $815,000 in 2006. She has deducted $115,000 in depreciation. Fran trades the building for an apartment complex. The apartment complex has a value of $850,000, and the exchange qualifies for like-kind deferral treatment. What is Fran's recognized gain on the exchange?
A)$- 0 -
B)$35,000
C)$115,000
D)$150,000
E)$850,000

Question

Quizplus · Accepted Answer

Since the exchange qualifies for like-kind deferral treatment, Fran's basis in the new property will be equal to the basis of the old property, minus any deferred gain. Fran's basis in the office building is $815,000 (original cost) - $115,000 (depreciation) = $700,000. Since Fran is not recognizing any gain on the exchange, her basis in the apartment complex will also be $700,000. Therefore, Fran has no recognized gain on the exchange.

Fran Owns a Commercial Office Building with a Fair Market