[Anonymous]

The below question is asking for the long-term capital gain, which I can get the answer for. But I am just wondering, what is Kurtz’s basis in the new land he got?

---

Kurtz exchanged land he held for 4 years as an investment, with a basis of 36,000, for a similar land valued at 40,000, which was owned by Flemming. In connection with this transaction, Kurtz assumed Flemming’s 10,000 mortgage and Flemming assumed Kurtz’s 12,000 mortgage. As a result of this transaction, Kurtz should report a long-term capital gain of

A. 6000

B. 4000

C. 0

D. 2000

D. 2000. In a like-kind exchange of investment property, a realized gain is recognized to the extent of un-like (boot) property received. Here, boot includes the assumption of a liability. Since Flemming’s assumption of $12,000 exceeds Kurtz’s assumption of $10,000, there is net boot received of $2,000.