Bobbie exchanges business equipment (adjusted basis $160,000)for other business equipment that has a FMV of $140,000.Bobbie also receives $30,000 cash.Bobbie's basis in the new equipment is
A)$130,000.
B)$140,000.
C)$160,000.
D)$170,000.

Question

Quizplus · Accepted Answer

B)This transaction qualifies as a like-kind exchange with boot received.The gain realized is $170,000 (FMV of new equipment plus $30,000 cash)- $160,000 adjusted basis of old equipment = $10,000.She must recognize gain to the extent of the lesser of the boot received or the realized gain so the full $10,000 realized gain is recognized.The basis of the new equipment is [$160,000 (old basis)- 30,000 (boot received)+ 10,000 (gain recognized)] = $140,000 or the FMV of property received less unrecognized gain of $0 = $140,000.

Bobbie Exchanges Business Equipment (Adjusted Basis $160,000)for Other Business Equipment