Example 1

- Basic gain/loss computation

Balon bought land 5 years ago for $4,000 cash, $25,000 loan, $1,000 legal fees, and $500 in

commissions. On 7/1 he sells the land to Arya. Arya gives him stock worth $10,000 and assumes Balon's

debt of $20,000. Arya also agrees to pay the full year's real estate taxes of $2,000. Balon pays $500 in

legal fees and a $2,000 commission with the sale. Arya pays $600 in legal fees and a $900 commission

related to the sale of the land. Arya's basis in the stock exchanged was $4,000. What are Arya's and

Balon's gain or loss on the sale (if any)? What is Arya's basis in the land?