On October 1, 2012, Donald Anderson exchanged an apartment
building having an adjusted basis of $375,000 and subject
to a mortgage of $100,000 for $25,000 cash and another apartment
building with a fair market value of $550,000 and subject to
a mortgage of $125,000. The property transfers were made subject
to the outstanding mortgages. What amount of gain should
Anderson recognize in his tax return for 2012?

(b) The requirement is to determine the amount of gain
recognized to Anderson on the like-kind exchange of apartment
buildings. Anderson’s realized gain is computed as follows:

FMV of building received $550,000

Mortgage on old building 100,000

Cash received 25,000

Amount realized $675,000

Less:

Basis of old building $375,000

Mortgage on new building 125,000 500,000

Realized gain $175,000

Since the boot received in the form of cash cannot be offset
against boot given in the form of an assumption of a mortgage,
the realized gain is recognized to the extent of the $25,000 cash
received.