Robert trades an office building located in Tennessee to John for an apartment complex located in New Jersey. Details of the two properties:

\begin{array}{lrr}&\text { Robert } & \text { John } \\&\text { Tennessee } & \text { N. Jersey }\\ \text { Fair Market Value } & \$ 9,000,000 & \$ 4,000,000 \\\text { Adjusted Basis } & 3,000,000 & 3,000,000 \\\text { Liabilities transferred with property } & 2,000,000 & -0 .\end{array}

In addition, John pays Robert $3,000,000 cash as part of this transaction. What is the gain (loss) recognized by Robert in this transaction and what is his basis in the New Jersey property?

\begin{array} { c r } \text { Gain Recognized } & \text { Adjusted Basis } \\\end{array}

\begin{array} { c r } \$ 6,000,000 &&& \$ 4,000,000 \\\end{array}

\begin{array} { c r } \$ 5,000,000 &&& \$ 3,000,000 \\\end{array}

\begin{array} { c r } \$ 3,000,000 &&& \$ 2,000,000 \\\end{array}

\begin{array} { c r } \$ 5,000,000 &&& \$ 4,000,000 \\\end{array}

\begin{array} { c r } \text { Some other amounts }\end{array}

The General Mechanism Used to Defer Gains and Losses from a Transaction

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