Acme Inc. and Beamer Company exchanged like-kind assets. Acme's asset had a $240,000 FMV and $117,300 adjusted tax basis, and Beamer's asset had a $225,000 FMV and a $168,200 adjusted tax basis. Beamer paid $15,000 cash to Acme as part of the exchange. Which of the following statements is true?
A) Acme's realized gain is $122,700 and recognized gain is -0-.
B) Beamer's realized gain is $56,800 and recognized gain is $15,000.
C) Acme's basis in its newly acquired asset is $117,300.
D) Beamer's basis in its newly acquired asset is $168,200.

Question

Quizplus · Accepted Answer

In a like-kind exchange, the basis of the acquired asset is the same as the basis of the asset given up. Therefore, Acme's basis in its newly acquired asset is $117,300. There is no recognized gain or loss in a like-kind exchange as long as certain requirements are met, so options A and B are incorrect. Option D is also incorrect as Beamer's basis in its newly acquired asset is $225,000 (the FMV of the asset given up).

Acme Inc and Beamer Company Exchanged Like-Kind Assets