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?

Answer rating: 100% (QA)

a Realized gain 6700 16000 amount realized 9300 tax basis recognized gain 6700 tax basis in new ... View the full answer