Robert Trades an Office Building Located in Tennessee to John

question 48

Short Answer

Robert trades an office building located in Tennessee to John for an apartment complex located in New Jersey. Details of the two properties: $\begin{array}{lrr}&\text { Robert } & \text { John } \\&\text { Tennessee } & \text { N. Jersey }\\ \text { Fair Market Value } & \$ 9,000,000 & \$ 4,000,000 \\\text { Adjusted Basis } & 3,000,000 & 3,000,000 \\\text { Liabilities transferred with property } & 2,000,000 & -0 .\end{array}$
In addition, John pays Robert $3,000,000 cash as part of this transaction. What is the gain (loss) recognized by Robert in this transaction and what is his basis in the New Jersey property?
$\begin{array} { c r } \text { Gain Recognized } & \text { Adjusted Basis } \\\end{array}$
A) $\begin{array} { c r } \$ 6,000,000 &&& \$ 4,000,000 \\\end{array}$
B) $\begin{array} { c r } \$ 5,000,000 &&& \$ 3,000,000 \\\end{array}$
C) $\begin{array} { c r } \$ 3,000,000 &&& \$ 2,000,000 \\\end{array}$
D) $\begin{array} { c r } \$ 5,000,000 &&& \$ 4,000,000 \\\end{array}$
E) $\begin{array} { c r } \text { Some other amounts }\end{array}$

• A) \(\begin{array} { c r } \$ 6,000,000 &&& \$ 4,000,000 \\\end{array}\)
• B) \(\begin{array} { c r } \$ 5,000,000 &&& \$ 3,000,000 \\\end{array}\)
• C)\(\begin{array} { c r } \$ 3,000,000 &&& \$ 2,000,000 \\\end{array}\)
• D)\(\begin{array} { c r } \$ 5,000,000 &&& \$ 4,000,000 \\\end{array}\)
• E)\(\begin{array} { c r } \text { Some other amounts }
• \end{array}\)

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Definitions:

Perfectly Competitive

A market structure characterized by a large number of small firms, identical products, and free entry and exit, with no single seller or buyer having market control.

Many Buyers

A market condition characterized by the presence of numerous purchasers, increasing competition and potentially lowering prices.

Real Prices

Prices that have been adjusted for inflation, reflecting the true purchasing power of money over time.

CPI

The Consumer Price Index (CPI) measures the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services.