Roy exchanges a productive use machine (adjusted basis of $9,000)for a new machine worth $6,000.In addition,he receives cash of $5,000.What is the recognized gain or loss and the basis of the new machine?
A)$0 and $9,000.
B)$0 and $4,000.
C)$2,000 and $6,000.
D)$2,000 and $9,000.
E)None of the above.

Question

Quizplus · Accepted Answer

Roy's total received value is $11,000 ($6,000 machine + $5,000 cash). The recognized gain is $2,000 ($11,000 received - $9,000 basis). The basis of the new machine is $6,000 (its fair market value).

Roy Exchanges a Productive Use Machine (Adjusted Basis of $9,000)for