Tanya Fletcher owns undeveloped land (adjusted basis of $80,000 and fair market value of $92,000) on…

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Tanya Fletcher owns undeveloped land (adjusted basis of $80,000 and fair market value of $92,000) on…

Tanya Fletcher owns undeveloped land (adjusted basis of $80,000 and fair market value of $92,000) on the East Coast. On January 4, 2017, she exchanges it with Lisa Martin (an unrelated party) for undeveloped land on the West Coast and $3,000 cash. Lisa has an adjusted basis of $72,000 for her land, and its fair market value is $89,000. As the real estate market on the East Coast is thriving, on September 1, 2018, Lisa sells the land she acquired for $120,000.

Complete the letter to Tanya advising her of the tax consequences of this exchange.

Hoffman, Young, Raabe, Maloney, & Nellen, CPAs
5191 Natorp Boulevard
Mason, OH 45040
January 14, 2017
Ms. Tanya Fletcher
The Corral
El Paso, TX 79968
Dear Ms. Fletcher:
You asked about the tax consequences of the January 4, 2017 land exchange with Lisa Martin. Based on the data provided, the tax consequences are as follows:
Amount realized$___
Less: adjusted basis$___
Equals: realized gain$___
Recognized gain$___
Because the transaction_____ as a nontaxable like-kind exchange, only $_____ of your potential gain of $_____ is recognized. The adjusted basis for the land received is $_____.
If I can be of further assistance, please let me know.
Sincerely,
Margaret Adams, CPA
Tax Partner
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