Perry IncAnd Dally Company Entered into an Exchange of Real Property

question 103

Multiple Choice

Perry Inc.and Dally Company entered into an exchange of real property.Here is the information for the properties to be exchanged. 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 the choices are correct.

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Definitions:

Business Processes

Sequential steps or tasks undertaken by a company or organization to achieve specific business objectives or deliver services/products.

Substantial Performance

A contract law principle that allows for partial enforcement of a contract when most, but not all, aspects of the contract have been fulfilled.

Impossibility

A legal defense where a party claims it was not possible to fulfill the terms of a contract due to unforeseen circumstances.

Commercial Impracticability

A legal doctrine that excuses a party from fulfilling a contract due to unforeseen and extreme difficulties or expenses.