Question

ated as capital ated as ondie t of S3000 of all ga all losfor follow up ain e ll Ir or ncie uestion 16 of 75 Which of the following situations involving an exchange of business property does NOT exemplity a fully nontaxable exchange? David traded his delivery van with Marcia for a delivery van that had more space and less mileage. He also paid her $2.000 n cash. Miranda traded a commercial building plus S50.000 for Patricia's commercial bulding. Ha ld traded an improved lot for Ofiver's rental house. Oliver paid the $2.000 expense incurred with the exchange. Sarkh traded a fully leased office building for an office bulding that did not have any tenants No cash or expenses incured or the exchange. Mark for follow up Auestion 17 of 75. anlied against the net 61231 gain beginning with:

Answer 1

Answer) Option B (Miranda traded a commercial building plus $50,000 for Patricia's commercial building)

SECTION 1 ASSET EXCHANGES

If similar assets are exchanged (e.g., an exchange of a truck for another truck), a change in the economic position of the company can result. For example, The useful life of the truck received is significantly longer than the truck given up. In this case the cash flows for the trucks can be significantly different. As a result, the transaction has commercial substance and fair value should be used as a basis for measuring the asset received in the exchange