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Realized, Recognized and Deferred Gain or Loss

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(A) Corporation exchanges several pieces of office furniture ($2,900 value and basis of $1,250) for 10 filing cabinets from (B) Corporation (filing cabinets value of $2,500 with a basis of $3,000). B Corporation provides A Corporation with season tickets, (B)Corporation paid $400 face value for the tickets

1. What is A Corporation's the and B Corporation's realized and recognized gains?

2. Their deferred gains or losses?

3. Their bases in the acquired properties

4. What alternative transaction to A Corporation would you suggest?

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Solution Summary

(A) Corporation exchanges several pieces of office furniture ($2,900 value and basis of $1,250) for 10 filing cabinets from (B) Corporation (filing cabinets value of $2,500 with a basis of $3,000). B Corporation provides A Corporation with season tickets, (B)Corporation paid $400 face value for the tickets

1. What is A Corporation's the and B Corporation's realized and recognized gains?

2. Their deferred gains or losses?

3. Their bases in the acquired properties

4. What alternative transaction to A Corporation would you suggest?

Solution Preview

1. A's realized gain will be:

Fair market value of filing cabinets $2,500
Fair market value of tickets 400
Amount realized $2,900
Adjusted basis in furniture 1,250
Total gain $1,650

Because it need only recognize gain to the extent of the fair market value of boot (i.e., non-like kind property) ...

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