Case Study

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Part 1

ACC221 Lesson 3 Case Study Template

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Part 1

Scenario: Gina Smith exchanges a business land with an adjusted basis of $400,000 and a fair market value of $700,000 for Jennifer Lopez's office building worth $600,000 and $100,000 cash. Jennifer had an adjusted basis of $450,000 in the building.

Answer the questions in the space provided below.

1. What is Gina's realized and recognized gain or loss and the basis in the office building?

2. What is Jennifer's realized and recognized gain or loss and the basis in the business land?

3. Assume no cash was received by Gina and the office building was worth $700,000. What would be Gina's realized and recognized gain or loss and the basis in the office building?

@Rio Salado College 5/3/2021 Start Date

Part 2

ACC221 Lesson 3 Case Study Template

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Part 2

Scenario: Frank Cortez's business property with an adjusted basis of $160,000 is condemned by local authorities. He receives a $240,000 condemnation award.

Answer the questions in the space provided below.

1. What would be Frank's realized and recognized loss?

2. What is Frank's realized and recognized gain or loss if he purchases qualified replacement property for $230,000? What would be Frank's basis in the new property?

3. What is Frank's realized and recognized gain or loss if he purchases replacement property for $270,000? What is Frank's basis in the new property?

4. What is Frank's realized and recognized gain or loss and the basis in the new property if the condemnation award is $140,000 and the replacement property costs $210,000?