Rydell Company exchanged business realty (initial cost $55,250; accumulated depreciation $25,450) for like-kind realty worth $44,000 and $2,000 cash. Assume that depreciation on the realty exchanged was computed using the straight-line method and that Rydell Company is not a corporation. As a result, Rydell must recognize:

Question

Quizplus · Accepted Answer

The exchange qualifies for like-kind exchange treatment under Section 1031 of the Internal Revenue Code. Therefore, no gain or loss is recognized on the exchange. However, the $2,000 cash received in the exchange is considered boot and is subject to tax as a Section 1231 gain.

Rydell Company Exchanged Business Realty (Initial Cost $55,250; Accumulated Depreciation