Vern owns farm acreage he inherited two years ago. there, Ask an Expert

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Vern owns farm acreage he inherited two years ago. There are no buildings or improvements to the land. He decides to perform an exchange and acquire two rental houses:

The Big Easy Farm:
Inherited Basis $451,739
Mortgage 0
Sale Price 769,633
Closing Costs 26,754

The Fixer House:
Purchase Price $625,000
Mortgage 400,000
Closing Costs 11,744
Cash from Accommodator 235,129
Cash required at Closing 1,615

The Money-Pit House:
Purchase Price $740,200
Mortgage 290,000
Closing Costs 14,329
Cash from Accommodator 464,700
Cash returned from Escrow $171

Required:
1. How much gain is taxable, if any?
2. What is the basis for the exchange properties before allocation? You should include a proof of your computations.
3. What are the allocated bases for The Fixer House and The Money-Pit House?

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Accounting Basics, Accounting

Category:- Accounting Basics
Reference No.:- M965385

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