# Company z exchanged old equipment fmv 16000 for new

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Chapter 26 / Exercise 1
Business Law Today, Standard: Text & Summarized Cases
Jentz/Miller
Expert Verified
1. Company Z exchanged old equipment (FMV \$16,000) for new equipment (FMV \$16,000). Company Z’s tax basis in the old equipment was \$9,300. a. Compute Company Z’s realized gain, recognized gain, and tax basis in the new equipment assuming the exchange was a taxable transaction. b. Compute Company Z’s realized gain, recognized gain, and tax basis in the new equipment assuming the exchange was a nontaxable transaction. c. Six months after the exchange, Company Z sold the new equipment for \$16,850 cash. How much gain does Company Z recognize if the exchange was taxable? How much gain if the exchange was nontaxable? Explanation
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Chapter 26 / Exercise 1
Business Law Today, Standard: Text & Summarized Cases
Jentz/Miller
Expert Verified
Boot received –0– (12,500) Basis of realty acquired \$62,500 \$ 47,500 3. Firm PO and Corporation QR exchanged the following business real estate: Marvin Gardens (exchanged by PO) Boardwalk (exchanged by QR) FMV \$ 1,040,000 \$ 325,000 Mortgage (715,000) -0- Equity \$ 325,000 \$ 325,000 a. If PO’s adjusted basis in Marvin Gardens was \$403,000, compute PO’s realized gain, recognized gain, and basis in Boardwalk. b. If QR’s adjusted basis in Boardwalk was \$78,000, compute QR’s realized gain, recognized gain, and basis in Marvin Gardens.
4. On June 2, 2017, a tornado destroyed the building in which FF operated a fast-food franchise. FF’s adjusted basis in the building was \$214,700. In each of the following cases. a. Determine FF’s recognized gain or loss on this property disposition and FF’s basis in the replacement building. Assume that FF would elect to defer gain recognition when possible. On September 8, 2017, FF received a \$250,000 reimbursement from its insurance company. On August 10, 2018, it completed construction of a replacement building for a total cost of \$300,000.