Question

Review each of the following scenarios. Then, choose the response that describes a nontaxable exchange. In each scenario, the taxpayer acquired property of equal or greater value.

 Gillian exchanged a plot of land for a rental house. She paid a broker’s commission of $2,000 as part of the exchange.

 Gregory traded a delivery van for an air conditioning unit.

 Jessica traded a commercial milling machine for another commercial milling machine. She also received $7,000 cash as part of the exchange.

 Iva traded a plot of land in Georgia for another plot of land in the country of Mexico. Prior to the exchange, Iva had made improvements to the property in Georgia. The property she acquired in Mexico had not been upgraded and did not include essential services.

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Jerome traded his fully depreciated office building with a fair market value (FMV) of $92,000 in exchange for a business-use office condominium with an FMV of $100,000. Jerome also paid the owner of the condominium $8,000 cash as part of the exchange. What is the amount of gain Jerome realized from this exchange, and what is the amount he must recognize and report as taxable income?

 $0 realized gain; $92,000 recognized gain.

 $8,000 realized gain; $92,000 recognized gain.

 $92,000 realized gain; $0 recognized gain.

 $92,000 realized gain; $8,000 recognized gain.