Justin Trades an Office Building Located in Michigan to John

question 9

Short Answer

Justin trades an office building located in Michigan to John for an apartment complex located in North Carolina.Details of the two properties:
$\begin{array}{lrr}&\text { Justin } & \text { John } \\& \underline {\text { Michigan } } & \underline { \text { N. Carolina } } \\\text { Fair market value } &\$ 9,000,000 & \$ 4,000,000 \\\text { Adjusted basis } &3,000,000 & 3,000,000 \\\text { Liabilities transferred with property } &2,000,000 & -0-\end{array}$
In addition,John pays Justin $3,000,000 cash as part of this transaction.What is the gain (loss)recognized by John in this transaction and what is his basis in the Michigan property?
$\begin{array}{ll}\text { Gain Recognized } & \text { Adjusted B asis } \\a.\$ 1,000,000 & \$ 9,000,000 \\b.\$-0- & \$ 8,000,000 \\c.\$ 1,000,000 & \$ 6,000,000 \\d.\$-0- & \$ 9,000,000\end{array}$
e. Some other amounts

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Definitions:

Bonds

Fixed-income securities that represent a loan made by an investor to a borrower, typically corporate or governmental.

Par

The face value of a bond or stock, at which it is issued or can be redeemed before maturity.

Par Value

The nominal or face value of a stock or bond as stated by the issuing company.

Cash Interest Payment

The actual cash paid by a borrower to a lender or bondholder as compensation for the use of borrowed money, usually at set intervals.