Elizabeth exchanges her retail storage assets for retail displays.In this like-kind exchange,Elizabeth receives $2,000 in cash.The storage assets have a fair market value of $12,000 and Elizabeth's basis in the assets is $3,000.The displays have a fair market value of $10,000 and a basis of $8,000.What is Elizabeth's recognized gain on the exchange?

Question

Quizplus · Accepted Answer

To calculate the recognized gain, we need to compare the total fair market value of what Elizabeth received ($10,000 in displays + $2,000 in cash = $12,000) to the adjusted basis of what she gave up ($3,000 in storage assets).

Total FMV received: $10,000 + $2,000 = $12,000
Adjusted basis of storage assets given up: $3,000

Since the FMV of what she received is greater than the adjusted basis of what she gave up, Elizabeth has a recognized gain of the difference:

$12,000 (FMV of what she received) - $3,000 (adjusted basis of what she gave up) = $9,000 recognized gain.

Therefore, the correct answer is B.

Elizabeth Exchanges Her Retail Storage Assets for Retail Displays