Tax effects of sale or exchange of a commercial buildingAudrey exchanges a warehouse with Dixon for an office
building. Audrey’s adjusted basis for her warehouse is $500,000. The FMV of
Dixon’s office building is $545,000. Audrey’ property has a $100,000 mortgage
that Dizon assumes.a. Calculate Audrey’s realized and recognized gain or loss.b. What is her adjusted basis for the office building?c. As an alternative, Dizon has proposed that he will
transfer cash of $100,000.
Rather than assume the mortgage. Audrey would use the cash
to pay off the mortgage. Advise Audrey on whether this alternative would be
beneficial to her from a tax perspective.