Toffel Inc. exchanged investment land subject to a $240,000 mortgage for unencumbered farmland. If Toffel realized a $168,000 gain on the exchange, it must recognize the entire gain.

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According to the accounting rules for nonmonetary exchanges, a gain must be recognized in full if the fair value of the asset received is greater than the carrying value of the asset given up. In this case, the investment land had a carrying value of $240,000 (due to the mortgage), while the farmland received was unencumbered and presumably had a fair value greater than $240,000, resulting in a gain of $168,000. Therefore, the entire gain must be recognized.