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  3. taxpayer t owns an office building worth $950,000,

Taxpayer T owns an office building worth $950,000, encumbered by a mortgage of $710,000. His original...

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Advance Math

Taxpayer T owns an office building worth $950,000, encumbered bya mortgage of $710,000. His original cost was $830,000, and he hastaken depreciation deductions of $185,000 on the building.

T wants to exchange his building for another office buildingworth $800,000. He will assume the existing mortgage of $580,000 onthe new building.

(This is a practice problem for an exam, please show work so Ican understand the problem and how to get the correct answer.)

  1. As stated, would this be a fair arms-length exchange? If not,who should be required to pay cash boot, and how much?Explain.
  2. Assuming the exchange is made under the terms of your answer to#1, compute the following for T, showing all calculations:

a. Realized gain

b. Recognized gain

c. Basis in the new building

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