Othello trades a concrete ready mix truck and a general purpose truck used in his landscape business to Sonja for an ore truck and a general purpose truck and $1,000 cash. The adjusted basis and fair market value of the assets traded are as follows:

Required:
Determine the income tax treatment of Othello's trade of his concrete truck and general purpose truck for Sonja's ore truck and general purpose truck. Use a tax research database and find the relevant authority(ies) that form the basis for your answer. Your answer should include the exact text of the authority(ies) and an explanation of the application of the authority to Othello's trade. If there is any uncertainty regarding the tax treatment of the sale, explain what is uncertain and what you need to know to resolve the uncertainty.

Transcribed Image Text:

Fair Market Value Adjusted Basis S30,000 19,000 Concrete ready mix truck General purpose truck Ore truck General purpose truck Cash $36,000 18,000 32,000 21,000 1,000