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Nancy and Tonya exchanged assets. Nancy gave Tonya her personal residence with an adjusted basis of $280,000 and a fair market value of $560,000. The house has a mortgage of $200,000, which is assumed by Tonya. Tonya gave Nancy a yacht used in her business with an adjusted basis of $250,000 and a fair market value of $360,000. What is Tonya's realized and recognized gain

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Answer:

Realized gain  $110,000

Recognized gain  $110,000

Explanation:

The computation of the Tonya's realized and recognized gain is shown below:

Amount realized by Tonya (fair market value)  $560,000

Less; Amount given by Tonya

Yacht: adjusted basis  ($250000)

Assumption of Nancy's mortgage  ($200000)

Realized gain  $110,000

Recognized gain  $110,000

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