Question: Rose Company owns Machine A adjusted basis of 12 000 and

Rose Company owns Machine A (adjusted basis of $12,000 and fair market value of $15,000), which it uses in its business. Rose sells Machine A for $15,000 to Aubry (a dealer) and then purchases Machine B for $15,000 from Joan (also a dealer). Machine B would normally qualify as like-kind property.
a. What are Rose Company's realized and recognized gain on the sale of Machine A?
b. What is Rose's basis for Machine B?
c. What factors would motivate Rose to sell Machine A and purchase Machine B rather than exchange one machine for the other?
d. Assume that the adjusted basis of Machine A is $15,000 and the fair market value of both machines is $12,000. Respond to (a) through (c).

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  • CreatedMay 25, 2015
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