Leonore exchanges 5,000 shares of Pelican, Inc., stock for 2,000 shares of Blue Heron, Inc., stock.Leonore's adjusted basis for the Pelican stock is $300,000 and the fair market value of the Blue Heron stock is $350,000.Leonore's recognized gain is $0, and her adjusted basis for the Blue Heron stock is $300,000.

Question

Quizplus · Accepted Answer

Leonore's recognized gain is the difference between the fair market value of the Blue Heron stock and the adjusted basis of the Pelican stock, which is $50,000 ($350,000 - $300,000). Therefore, her recognized gain is not zero, and her adjusted basis for the Blue Heron stock is not equal to her adjusted basis for the Pelican stock.

Leonore Exchanges 5,000 Shares of Pelican, Inc