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Two independent companies, ABC Co. and XYZ Co., exchange buildings. The transaction lacks commercial substance. An appraiser

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Answer #1

Realized gain = Fair value of the asset given up - Carrying value of the asset given up

= $85,000 - ($90,000 - $40,000)

= $35,000

As XYZ Co. paid the amount to ABC Co., no realized gain is recognized in the case of boot paid.

Recognized gain = $0

The answer is a.

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