Johnson Inc Pursuant to the Exchange, C&K Paid $25,000 Cash to Johnson

question 12

Multiple Choice

Johnson Inc. and C&K Company entered into an exchange of real property. Here is the information for the properties to be exchanged. $$\begin{array} { l r r } & \text { Johnson } & C \& K \\\text { FMV } & \$ 900,000 & \$ 675,000 \\\text { Adjusted tax basis } & \mathbf { 5 9 3 , 0 0 0 } & 462,000 \\\text { Mortgage } & \mathbf { 2 0 0 , 0 0 0 } & - 0 \text { - }\end{array}$$ Pursuant to the exchange, C&K paid $25,000 cash to Johnson and assumed the mortgage on the Johnson property. Compute C&K's gain recognized on the exchange and its tax basis in the property received from Johnson.

• A) $200,000 gain recognized; $662,000 basis in Johnson property
• B) No gain recognized; $462,000 basis in Johnson property
• C) No gain recognized; $487,000 basis in Johnson property
• D) None of the above

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Definitions:

Chi-Squared Distributed

Referring to a statistical distribution that is used to describe the distribution of the sum of squares of a set of variables, often used in hypothesis testing.

T-Distribution

A statistical distribution that occurs when calculating the average of a population with a normal distribution, under conditions where the sample size is small and the population's variance is not known.

Degrees of Freedom

The number of independent values or quantities that can vary in a statistical calculation.

Chi-Square Critical Value

A point on the chi-square distribution that is compared to the chi-square test statistic to determine whether to reject the null hypothesis.