Benito Owns an Office Building He Purchased Five Years Ago

question 82

Essay

Benito owns an office building he purchased five years ago at a cost of $600,000. The property is currently worth $800,000, has an adjusted basis of $300,000 and is encumbered by a $400,000 mortgage.
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:

Family Function

The ways in which a family operates as a unit to meet the needs of its members, including economic support, emotional comfort, and nurturing.

Family Form

The structure or makeup of a family unit, which can vary widely across different cultures and societies.

Family Structure

Based on organization (i.e., ongoing membership) of the family and the pattern of relationships.

Peacekeeper

An individual or force involved in the prevention, mitigation, or resolution of conflict within or between communities or nations.