[nib]

hello friends ,

help me with following calculation .I thought correct answer would be 150,000 , but here correct answer is 50,000 .is netting of mortgage allowed in like kind exchange . any mnemonics to remember it .

In the current year Tantrum exchanged farmland for an office building. The farmland had a basis of $240,000, a fair market value (FMV) of $390,000, and was encumbered by a $110,000 mortgage. The office building had an FMV of $340,000 and was encumbered by a $60,000 mortgage. Each party assumed the other’s mortgage. What is the amount of Tantrum’s recognized gain?

ans= 50000

Tantrum should recognize a gain of $50,000. Since each party assumed the other’s mortgage, Tantrum’s mortgage liability was reduced from $110,000 to $60,000, and thus he benefited or gained by $50,000.