59. Cindy exchanges investment real estate with Russell. Cindy purchased her realty two years ago for $280,000, and it is encumbered by a mortgage of $100,000 and has a fair market value of $320,000 when exchanged. Russell paid $80,000 cash for his property in 1999 and it is appraised at $150,000 on the day of the exchange. Russell assumes the debt on his new land and pays Cindy enough in cash to balance the exchange. What is Cindy's recognized gain (loss) on the exchange?

a.

$-0-

b.

$40,000

c.

$100,000

d.

$170,000

ANSWER:

b

60. Belinda exchanges investment real estate with Russell. Belinda's adjusted basis in her two-year old property is $280,000. The property is encumbered by a mortgage of $100,000 and has a fair market value of $320,000 when exchanged. Russell assumes that debt. Russell paid $80,000 cash for his property in 1999 and it is appraised at $150,000 on the day of the exchange. Russell pays Belinda enough in cash to balance the exchange. What is Belinda's basis in the new land?

a.

$20,000

b.

$150,000

c.

$280,000

d.

$320,000

ANSWER:

b

These questions are exactly the same. Please explain how to get the recognized gain of $40,000, and basis in the new land of $150,000. Also, please include how to calculate the cash amount Russell gives to Cindy. Thank you!