[whitesoxfancpa]

In like-kind exchanges, a gain can only be recognized to the extent of boot received.

So if you have a realized gain of $3,000 and boot received of $2,500, a gain of only $2,500 is recognized, and the basis of the property received is reduced by $500. Simple enough.

Now what if you have a realized gain of $3,000, boot received of $2,500, and boot paid of $1,000? Can you recognize $2,500, since that is boot RECEIVED, or do you only recognize $1,500, which is NET boot received?

I have two examples in front of me, and one of them nets the boot and the other doesn’t!

Is there a certain rule depending on what the boot is? If the boot received and boot paid are the same do you net them?

Thanks for any input.

AUD 96 FAR 95 REG 94 BEC 88

[nolifecpa]

boot “paid” is factored into “realized gain”

“recognized gain” is the lesser of: 1) realized gain or 2) boot rec'd

so if realized gain=3,000 and boot rec'd=2,500, RECOGNIZED gain will be 2,500 (lesser of)

let me know if you need me to further clairify

REG-65,71,74,73,70,74,79
BEC-60's,60's,69,71,76*,78
FAR-67,66,65,79
AUD-54,60's,65,83*,69,80
*expired

DONE

[whitesoxfancpa]

nolifecpa,

So if you receive boot of $2,500 and pay boot of $1,000, which means net boot received of $1,500, your recognized gain can be $2,500? It's not limited to $1,500 since that is NET BOOT received. Is this correct? Thanks.

AUD 96 FAR 95 REG 94 BEC 88

[Anonymous]

It depends on what “kind” of boot you are dealing with. If it a mortgage swap, then you can net the mortgages. Also, if you are GIVEN debt relief (i.e. – the other person assumes your mortgage) and YOU PAY cash, those amounts can be netted together to determine boot received. However, if the previous scenario is reversed (assuming mortgage and receiving cash) then the amounts are NOT netted.

[whitesoxfancpa]

CPAJD,

Thanks. That is such a stupid rule!

How about if you are given debt relief and assume another debt? Are those netted?

What about if you are given debt relief, pay cash, and assume some other debt?

Etc. Etc. Etc.

Thanks.

AUD 96 FAR 95 REG 94 BEC 88

[Author]

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