Pierce exchanges an asset (adjusted basis of $14,000; fair market value of $18,000) for another asset (fair market value of $15,000).In addition, he receives cash of $3,000.If the exchange qualifies as a like-kind exchange, his recognized gain is $3,000 and his adjusted basis for the property received is $17,000 ($14,000 + $3,000 recognized gain).

Question

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The fair market value of the property received ($15,000) is less than the fair market value of the property given up ($18,000), which means it does not qualify as a like-kind exchange. Therefore, Pierce's recognized gain would be $4,000 ($18,000 - $14,000) and his adjusted basis for the property received would be $15,000. The cash received does not affect the calculation of the recognized gain or adjusted basis.

Pierce Exchanges an Asset (Adjusted Basis of $14,000; Fair Market