Prater Incorporated enters into an exchange in which it gives up its warehouse o 10 acres of land and receives a tract of land. A summary of the exchange is as follows: Transferred FMV Warehouse $ 432,500 Original Basis $ 278,000 Accumulated Depreciation $ 55,500
Prater Incorporated enters into an exchange in which it gives up its warehouse o 10 acres of land and receives a tract of land. A summary of the exchange is as follows: Transferred FMV Warehouse $ 432,500 Original Basis $ 278,000 Accumulated Depreciation $ 55,500
Chapter12: Nonrecognition Transactions
Section: Chapter Questions
Problem 21P
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Transcribed Image Text:Prater Incorporated enters into an exchange in which it gives up its warehouse on 10 acres of land and receives a tract of
land. A summary of the exchange is as follows: What are Prater's realized and recognized gain on the exchange and its
basis in the assets it received in the exchange? Answer is complete but not entirely correct.
Prater Incorporated enters into an exchange in which it gives up its warehouse on
10 acres of land and receives a tract of land. A summary of the exchange is as
follows:
Transferred
Warehouse
Land
Mortgage on warehouse
Cash
Assets Received
Land
FMV
$ 432,500
Original
Basis
Accumulated
Depreciation
$ 278,000
$ 55,500
55,000
55,000
63,750
21,000
21,000
FMV
$ 444,750
What are Prater's realized and recognized gain on the exchange and its basis in the
assets it received in the exchange?
Answer is complete but not entirely correct.
Description
Realized gain
Amount
$
167,250
Recognized gain
$
84,750 x
Adjusted basis in new property
$ 278,000
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