Kim owns a storage building that is used exclusively in her business. The building has an adjusted basis of $8,500 (FMV $5,000). Kim transfers the building and $2,000 cash to David for another building (also used for business purposes) that has an FMV of $7,000. 

a. What is Kim’s recognized gain or loss on the exchange?

b. What is Kim’s adjusted basis in the storage building?