Perry Inc and Dally Company Entered into an Exchange of Real

question 82

Multiple Choice

Perry Inc. and Dally Company entered into an exchange of real property. Here is the information for the properties to be exchanged. $\begin{array}{lccc} & \text { Perry } & \text { Dally } \\\text { FMV } & \$ 500,000 & \$ 530,000 \\\text { Adjusted tax basis } & 410,000 & 283,000 \\\text { Mortgage } & 70,000 & 100,000\end{array}$ Pursuant to the exchange, Perry assumed the mortgage on the Dally property, and Dally assumed the mortgage on the Perry property. Compute Dally's gain recognized on the exchange and its tax basis in the property received from Perry.

• A) $30,000 gain recognized; $313,000 basis in the Perry property.
• B) 100,000 gain recognized; $383,000 basis in the Perry property.
• C) $30,000 gain recognized; $283,000 basis in the Perry property.
• D) None of these choices are correct.

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Definitions:

External Decision Makers

Individuals or entities outside of a company that use its financial information to make decisions, such as investors and creditors.

International Financial Reporting Standards (IFRS)

A set of accounting standards developed by the International Accounting Standards Board (IASB) that guide the preparation of financial statements globally.

Retained Earnings

The portion of net income that is not distributed to shareholders as dividends but retained by the company for reinvestment.