Sammy Exchanges Land Used in His Business in a Like-Kind $\quad$

question 31

Essay

Sammy exchanges land used in his business in a like-kind exchange.The property exchanged is as follows: $\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\text { Property Surrendered }$$\text { Property Received }$
$\begin{array}{lcccc}& \underline{\text { Adi. Basis }}& \underline{\text { FMV}}& \underline{\text { Adj. Basis }} & \underline{\text { FMV }}\\\text { Land } & \$ 44,000 & \$ 60,000 & \$ 50,000 & \$ 43,000 \\\text { Cash } & & & \$ 5,000 & \$ 5,000 \\\text { Liability on land } & \$ 12,000 & \$ 12,000 & & \\{\begin{array}{l}\text { The other party assumes the liability. }\end{array}} & & &\end{array}$
a.What is Sammy's recognized gain or loss?
b.What is Sammy's basis for the assets he received?

---

Definitions:

Work in Process Inventory

Goods that are in the process of being produced but are not yet finished in a manufacturing company.

Actual Overhead

The real costs incurred for overhead in production processes, as opposed to budgeted or estimated costs.

Overhead Applied

The portion of overhead costs allocated to individual products or services based on a predetermined rate.

Indirect Materials

Substances utilized during manufacturing that cannot be specifically associated with any single product, like machine lubricants.