Moss exchanges a warehouse for a building he will use as an office building. the adjusted basis of the warehouse is $600,000 and the fair market value of the office building is $350,000. in addition, moss receives cash of $150,000. what is the recognized gain or loss and the basis of the office building?

a. ($100,000) and $350,000.

b. $0 and $450,000.

c. ($150,000) and $300,000.

d. ($200,000) and $350,000.

The correct answer is " b. $0 and $450,000.  ".

Explanation: First we must calculate the amount for which we change the warehouse ($ 350,000 + $ 150,000) = $ 500,000.

The adjusted base of the warehouse was $ 600,000.

Therefore there is a loss of $ 100,000, which is not recognized because it is not realized at that time in the face of an exchange of such characteristics, the base of the office building must be calculated taking into account the postponed loss:

Fair market value ($ 350,000) + Postponed loss ($ 100,000) = $ 450,000.