Dean exchanges business equipment with a $120,000 adjusted basis for $40,000 cash and business equipment with a $140,000 FMV.What is the amount of gain which Dean recognizes on the exchange?
A)$0
B)$20,000
C)$40,000
D)$60,000

Question

Quizplus · Accepted Answer

C)This transaction qualifies as a like-kind exchange with boot received.Amount Realized ($40,000 + $140,000)- Adjusted Basis ($120,000)= $60,000 gain realized.Gain is recognized to the extent of boot received-$40,000.

Dean Exchanges Business Equipment with a $120,000 Adjusted Basis for $40,000