In two unrelated transactions, Laura exchanges property that qualifies forlike-kind exchange treatment. In the first exchange, Laura gives up landpurchased in May 2017 (adjusted basis of $20,000; fair market value of $17,000) inexchange for a different parcel of land (fair market value of $15,000) and $2,000cash. In the second exchange, Laura receives a parking garage (to be used in herbusiness) with a fair market value of $50,000 in exchange for a plot of land she hadheld for investment. The land was purchased in April 2011 for $12,000 and has acurrent fair market value of $48,000. In addition to transferring the land, Laura paysan additional $2,000 to the other party.a. What is Laura’s adjusted basis for the new parcel of land?b. When does the holding period begin?c. What is Laura’s adjusted basis for the parking garage?d. When does the holding period begin?e. How could Laura structure either of the transactions differently to produce bettertax consequences?

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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In two unrelated transactions, Laura exchanges property that qualifies for
like-kind exchange treatment. In the first exchange, Laura gives up land
purchased in May 2017 (adjusted basis of $20,000; fair market value of $17,000) in
exchange for a different parcel of land (fair market value of $15,000) and $2,000
cash. In the second exchange, Laura receives a parking garage (to be used in her
business) with a fair market value of $50,000 in exchange for a plot of land she had
held for investment. The land was purchased in April 2011 for $12,000 and has a
current fair market value of $48,000. In addition to transferring the land, Laura pays
an additional $2,000 to the other party.
a. What is Laura’s adjusted basis for the new parcel of land?
b. When does the holding period begin?
c. What is Laura’s adjusted basis for the parking garage?
d. When does the holding period begin?
e. How could Laura structure either of the transactions differently to produce better
tax consequences?
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