Worth $800,000,has an Adjusted Basis of $300,000 and Is Encumbered

question 17

Essay

worth $800,000,has an adjusted basis of $300,000 and is encumbered by a $400,000 mortgage.
Benito owns an office building he purchased five years ago at a cost of $600,000.The property is currently
Mitch owns an apartment complex he purchased three years ago at a cost of $600,000.The property is currently worth $750,000,has an adjusted basis of $500,000 and is encumbered by a $325,000 mortgage.
Benito and Mitch would like to exchange the properties and their respective mortgages.Answer the following questions regarding the exchange.
a.Any boot is to be paid in cash.Who must pay the boot and how much must be paid?

b.Does Benito have to recognize any gain on the exchange? If so,indicate the amount of gain to be recognized and why it must be recognized.

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Definitions:

Dummy Variables

Variables used in regression analysis to represent categorical data, allowing such data to be included in statistical models.

Qualitative Variable

A variable that expresses descriptive attributes and can be categorized based on traits and characteristics rather than numerical values.

Regression Model

A mathematical representation used to understand the relationship between independent predictor variables and a dependent outcome variable.

Adjusted Coefficient

A modified version of a coefficient in statistical models, adjusted for the influence of other variables.