Question

garibaldo llc exchanged land used in its business for some new land. garibaldo originally purchased the land it exchanged for $34,500. the new land had a fair market value of $38,250. garibaldo also received $8,500 of office equipment in the transaction. what is garibaldo's recognized gain or loss on the exchange?

Answer 1

$3,750 traded some of the company's existing land for some new land. Garibaldo initially bought the property realized  loss on the trade.

How to calculate Profit or loss on the trade?

The following formula is used to calculate the recognized gain or loss from the exchange:

Here, the cash received was $8500, and the profit was realized at

= Exchanged value less fair market value

= $38,250 - $34,500

= $3,750

Considering the lesser of the realized gain or the cash received to determine the amount that should be reported

As can be observed, the $3,750 is less than the $8,500 in comparison.

So there would be a gain or loss of $3,750

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