Cal exchanges office furniture (fair market value = $100,000; adjusted basis = $90,000) and a business auto (fair market value = $10,000; adjusted basis = $6,000) for fire retardant filing cabinets (fair market value = $110,000; adjusted basis = $80,000). How much gain or loss does Cal recognize on the exchange?

Question

Quizplus · Accepted Answer

Cal recognizes a $4,000 gain on the auto because the fair market value ($10,000) exceeds the adjusted basis ($6,000). The exchange of furniture is a like-kind exchange, so no gain is recognized on it.

Cal Exchanges Office Furniture (Fair Market Value = $100,000; Adjusted