Homer has had a rough year, but it looks like he is trying to make the best of it. First, he has been in the rental industry for quite some time. After a few years with some unruly tenants, he decided take up farming and get out of the rental business. He exchanged his apartment complex for a farm. His adjusted basis for the apartment complex is $600,000 and is subject to a $180,000 liability. The fair market value of the farm that he is obtaining is $770,000.

About three months after owning the farm, one of his barns burned to the ground. Homer basis in the barn was $30,000. The barn had been appraised at considerably more than $30,000 and it was insured for fair market value. He actually collected $50,000 on the casualty. He decided to rebuild another much nicer barn, and spent $75,000 on the new structure.

Now, the tractor was another story.Homer hasnt driven a tractor very much. He was trying to till along a hillside and the tractor rolled over. Luckily, Homer was able to jump clear of the tractorbut, it rolled down the hill and into a lake. Needless to say, it was ruined. He was able to recoup $14,000 from his insurance company for the tractor, but he decided to fence in the farm and raise cattle instead of crops. He took the $14,000 from the insurance company and spent another $6,000 on fencing (total of $20,000). Homer had a basis in the tractor of $8,000.

Since he decided against raising crops, he wanted to get rid of his combine and hay baler as well. He traded the combine for a large backhoe. His adjusted basis in the combine is $25,000 and the backhoe has a fair market value of $27,000. He sold the hay baler to his brother for $11,000. He had an adjusted basis of $18,000 in the hay baler, but since it was his brother, he gave him a good deal. THENhis brother went out and sold the hay baler for $15,000!!! Homer is a little ticked off about that.

Homer is concerned about the tax consequences of the above transactions. And, he wants to take any losses that he is entitled to take.

What will be his realized gain or loss and his recognized gain or loss on the following asset disposals:

1. Apartment complex
2. Barn that burned
3. Tractor that drowned in the lake
4. Combine
5. Hay baler

What is Homers basis in the following new assets

1. Farm
2. New barn
3. Fencing
4. Backhoe

What is Homers brothers recognized gain or loss on the sale of the hay baler?