Berly Company transferred an old asset with a $12,300 adjusted tax basis in exchange for a new asset worth $20,000. Which of the following statements is false?
A) The old asset's FMV is $20,000.
B) If the exchange is nontaxable, Berly's tax basis in the new asset is $12,300.
C) If the exchange is taxable, Berly's recognized gain is $7,700.
D) None of these statements are false.

Question

Quizplus · Accepted Answer

All the statements provided are true based on the information given. In a nontaxable exchange, the basis of the new asset would indeed be the same as the adjusted tax basis of the old asset ($12,300). In a taxable exchange, the recognized gain would be the difference between the fair market value (FMV) of the new asset ($20,000) and the adjusted tax basis of the old asset ($12,300), which is $7,700.

Berly Company Transferred an Old Asset with a $12,300 Adjusted