Juniper, Inc., exchanges some real estate (basis of $800,000 and fair market value of $1,000,000) for other real estate owned by Birch, Inc., (basis of $1,200,000 and fair market value of $900,000) and $100,000 in cash. The real estate involved is unimproved and is held by Juniper and Birch, before and after the exchange, as non-investment property.
a. What is Juniper’s realized gain on the exchange? Recognized gain?
b. What is Birch’s realized loss? Recognized loss?
c. Support your results in parts (a) and (b) under the wherewithal to pay concept as applied to like-kind exchanges (§ 1031).