LO.5 Cardinal Properties, Inc., exchanges real estate held for investment plus stock for real estate to be held for investment. The stock transferred has an adjusted basis of

$30,000 and a fair market value of $35,000. The real estate transferred has an adjusted basis of $40,000 and a fair market value of $112,000. The real estate acquired has a fair market value of $147,000.

a. What is Cardinal’s realized gain or loss?

b. Its recognized gain or loss?

c. The basis of the newly acquired real estate?

DECISION MAKING