Determine all of the tax effects to woodrow and eileen

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Reference no: EM13135837

Woodrow owns an apartment building that he acquired in May, 2002. He paid $125,000 in cash and assumed a note for $795,000 to complete the purchase. Legal fees and closing costs were $5,900. Woodrow paid $6,500 for half of the seller`s commission and the seller paid all of the property tax for 2002, amounting to $14,232. In March 2004, Woodrow made improvements to the exterior at a cost of $119,000 and $210,000 for changes to the interior. 10% of the original acquisition cost was allocated to the land.

In 2011 the property generated $423,000 in revenue and $412,000 for expenses like maintenance, on-site management, insurance, and property taxes, up until the property was exchanged in October 2011. Early in 2011 Woodrow made a decision to exchange his apartment building for a certain office complex. At the time of the exchange, the FLC of the apartment was $1,294,000 and a balance of $164,000 was owed on a mortgage. Woodrow entered into an agreement with Eileen to exchange his apartment for her office complex. The agreed upon value for the office complex was $1,421,000 and subject to a mortgage of $590,000. The office complex was cited on 3 acres valued at $250,000 (included in the FMC already identified). (Woodrow had previously determined to offer sufficient shares of IBM stock, valued at $102/share with basis $74/share plus office equipment valued at $48,300 with a basis of $21,000 if he was required to “chip” in something extra to make the deal agreeable to Eileen. He would really like to get rid of the equipment). At the same time, Eileen had decided to chip in either cash or maintenance equipment valued at $32,000 with basis of %15,000 to make the deal work for Woodrow. Eileen`s basis in her property is $921,000 at the time the exchange was completed. Eileen paid $21,000 for half of the sales commission, Woodrow paid the other half. Each paid their respective share of property taxes for the time each owned the property being exchanged. Woodrow`s legal fees were $4,900 and Eileen`s were $6,200.

Determine all of the tax effects to Woodrow and Eileen.

Reference no: EM13135837

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