Calculate eds realized and recognized gain on the exchange

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Reference no: EM13343149

Ed owns investment land with an adjusted basis of $35,000. Polly has offered to purchase the land from Ed for $175,000 for use in a real estate development.

The amount offered by Polly is $10,000 in excess of what Ed perceives as the fair market value of the land. Ed would like to dispose of the land to Polly but does not want to incur the tax liability that would result. He identifies an office building with a fair market value of $175,000 that he would like to acquire. Polly purchases the office building and then exchanges the office building for Ed's land.

a. Calculate Ed's realized and recognized gain on the exchange and his basis for the office building.

b. Calculate Polly's realized and recognized gain on the exchange and her basis in the land.

Reference no: EM13343149

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