Exam 9: Nontaxable Exchanges

Yelano Inc. exchanged an old forklift used in its business for a new forklift. This exchange qualifies as a nontaxable like-kind exchange.

Babex Inc. and OMG Company entered into an exchange of real property. Here is the information for the properties to be exchanged. Pursuant to the exchange, OMG assumed the mortgage on the Babex property. -Compute OMG's gain recognized on the exchange and its tax basis in the property received from Babex.

All types of business and investment real properties are like-kind.

Rydell Company exchanged business realty (initial cost $55,250; accumulated depreciation $25,450) for like-kind realty worth $44,000 and $2,000 cash. Assume that depreciation on the realty exchanged was computed using the straight-line method and that Rydell Company is not a corporation. As a result, Rydell must recognize:

Lorch Company exchanged an old asset with a $120,700 tax basis and a $155,000 FMV for a new asset with a $142,250 FMV and $12,750 cash. a. If the old asset and the new asset are like-kind properties, compute Lorch's realized and recognized gain and Lorch's tax basis in the new asset. b. How would your answers change if the new asset is worth only $116,000, and Lorch received $39,000 cash in the exchange?