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OCD exchanged old realty for new like-kind realty. OCD’s adjusted basis in the old realty was $31,700 ($60,000 initial cost − $28,300 accumulated depreciation), and its FMV was $48,000. Because the new realty was worth only $45,000, OCD received $3,000 cash in addition to the new realty. a-1. Compute OCD's realized gain. a-2. Determine the amount and character of any recognized gain. b. Compute OCD’s basis in its new realty.

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Answer:

A. $16,300 gain

B. $31,700

Explanation:

A. Computation of OCD's realized gain.

Using this formula

OCD's realized gain=Amount realized-Basis in old realty

Let plug in the formula

OCD's realized gain=$48,000-$31,700

OCD's realized gain=$16,300 gain

Therefore OCD's realized gain is $16,300 gain

B. Based on the information given we were told that the adjusted basis in the old realty was the amount of $31,700 which means that OCD’s basis in its new realty will be $31,700