Ko exchanges computer equipment (five-year property)with an adjusted basis of $9,000 for a business auto (five-year property)worth $6,000.Ko also receives cash of $5,000.What are the recognized gain or loss and the basis of the new auto?
A)$0 and $9,000.
B)$0 and $6,000.
C)$2,000 and $11,000.
D)($3,000)and $12,000.

Question

Quizplus · Accepted Answer

Ko receives a total of $11,000 ($6,000 auto + $5,000 cash) for equipment with a basis of $9,000, resulting in a recognized gain of $2,000. The basis of the new auto is the fair market value of the auto ($6,000) plus the recognized gain ($2,000), totaling $11,000.

Ko Exchanges Computer Equipment (Five-Year Property)with an Adjusted Basis of $9,000