Tom Gow owned a parcel of investment real estate that had an adjusted basis of $25,000 and a fair market value of $40,000. During 2007, Gow exchanged his investment real estate for the items of property listed below.
|
Land to be held for investment (fair market value) |
$35,000 |
|
A small sailboat to be held for personal use (fair market value) |
3,000 |
|
Cash |
2,000 |
What is Tom Gow’s recognized gain and basis in his new investment real estate?
|
Gain recognized |
Basis for real estate |
|
|
a. |
$2,000 |
$22,000 |
|
b. |
$2,000 |
$25,000 |
|
c. |
$5,000 |
$25,000 |
|
d. |
$5,000 |
$35,000 |