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27 Nov 2019

Delta Enterprises trades an asset that costs $55,000 and hadaccumulated depreciation of $37,000 for another asset with a fairmarket value of $20,000. The exchange is deemed to lack commercialsubstance. Delta pays $500 in cash. Delta's asset has a fair marketvalue of $19,500. Compute Delta's recognized gain or loss on theexchange.

a) $2,500 loss recognized

b) $2,500 loss realized but not recognized
c)

$1,500 gain recognized

d) $1,500 gain realized, but not recognized

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Deanna HettingerLv2
12 Oct 2019
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Related questions

29. Joyce exchanges a machine used in her trade or business foranother machine. In addition, she gives 200 shares of AlphaCorporation stock which have a fair market value of $38,000 and abasis of $29,000. The old machine has an adjusted basis of $36,000and the new machine has a fair market value of $100,000. What isthe recognized gain or loss and the basis of the new machine?

a. $26,000 and $74,000.

b. $9,000 and $74,000.

c. $26,000 and $100,000.

d. $9,000 and $100,000.

e. None of the above.

30. In order to qualify for like-kind exchange treatment:

a. The form of the transaction must bean exchange.

b. Both the property transferred and theproperty given must be held for productive use in a trade orbusiness or for investment.

c. The property must be like kind.

d. All of the above.

e. None of the above.

31. In regard to nontaxable exchanges which, if any, of thefollowing is correct?

a. Neitherrealized gains or losses are recognized.

b. Realized gainsare not recognized but realized losses are recognized.

c. Realizedgains and losses are recognized.

d. Realized lossesare not recognized but realized gains are recognized.

e. None of theabove.

32. Taxpayer receives stock as a gift from his nephew. Theadjusted basis of the stock is $15,000 and the fair market value is$37,000. Taxpayer trades the stock for bonds with a fair marketvalue of $35,000 and $2,000 cash. What is his recognized gain andthe basis for the bonds?

a. $2,000,$17,000.

b. $0, $15,000.

c. $2,000,$15,000.

d. $22,000,$35,000.

e. None of theabove.

Circle Co. owns equipment 1 (FMV = $50,000, AB = $15,000) that it uses in its business. Circle Co. exchanges equipment 1 for equipment 2 (FMV = $40,000) and stock worth $10,000 in a like - kind exchange.

17. What is Ci rcle Co.’s r ecognized gain or loss on the exchange? Note: you should calculate realized gain/loss first, but the question asks only for recognized gain/loss.

18. What is Circle Co.’s basis in equipment 2?

19. What is Circle Co.’s basis in the stock?

Note: the realized gain that was not recognized in Q17 did not disappear; it is built in to equipment 2 after the exchange (FMV of Equip 2 minus Circle Co.’s basis should equal any realized but not recognized gain from Q17.

Steffen-Zweig Company exchanges two used printing presses with atotal net book value of $24,000 ($40,000 cost less accumulateddepreciation of $16,000) for a new printing press with a fair valueof $24,000 and $3,000 in cash. The fair value of the two usedprinting presses is $27,000. The transaction is deemed to lackcommercial substance.

Required:
Determine the amount of gain or loss that would be recognized fromthis exchange of assets.

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