Arlington LLC exchanged land used in its business for some new land. Arlington originally purchased the land for $28,000. The new land had a fair market value of $35,000. Arlington also received $2,000 of office equipment in the transaction. What is Arlington's gain or loss recognized on the exchange?
A) $0.
B) $2,000.
C) $7,000.
D) $9,000.
E) None of the choices are correct.

Question

Quizplus · Accepted Answer

The gain recognized is the lesser of the fair market value of the boot ($2,000 of office equipment) or realized gain of $9,000 ($35,000 fair market value plus $2,000 boot less $28,000 adjusted basis).

Arlington LLC Exchanged Land Used in Its Business for Some