Kornek Inc. transferred an old asset with a $200,000 adjusted tax basis plus $12,000 cash in exchange for a new asset worth $260,000. Which of the following statements is false?
A) If the exchange is taxable, Kornek recognizes a $48,000 gain.
B) If the exchange is nontaxable, Kornek recognizes a $12,000 gain.
C) If the exchange is nontaxable, Kornek's tax basis in the new asset is $212,000.
D) None of these statements are false.

Question

Quizplus · Accepted Answer

If the exchange is nontaxable, Kornek recognizes no gain or loss. The tax basis in the new asset would be the same as the tax basis in the old asset ($200,000), plus any additional cash paid ($12,000), for a total tax basis of $212,000. Therefore, statement B is false. Statements A and C are true, and D is not a statement (it is the option to choose if all statements are true).