Moss Exchanges a Warehouse for a Building He Will Use

question 41

Multiple Choice

Moss exchanges a warehouse for a building he will use as an office building.The adjusted basis of the warehouse is $600,000 and the fair market value of the office building is $350,000.In addition, Moss receives cash of $150,000.What is the recognized gain or loss and the basis of the office building?

• A)$0 and $350,000.
• B)$0 and $450,000.
• C)($150,000) and $300,000.
• D)($200,000) and $350,000.

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Definitions:

Sensitivity Analysis

A financial modeling tool used to evaluate how different values of an independent variable affect a particular dependent variable under a given set of assumptions.

NPV

Net Present Value, a method used in capital budgeting to evaluate the profitability of an investment or project.

IRR

Internal Rate of Return, a financial metric used to estimate the profitability of potential investments.

Fixed Costs

Expenses that do not change with the level of production or sales over a short period, such as rent or salaries.