Sonny Exchanges a Productive Use Machine (Adjusted Basis of $20,000)

question 115

Multiple Choice

Sonny exchanges a productive use machine (adjusted basis of $20,000) for a new machine worth $18,000.In addition, he receives cash of $6,000.What is the recognized gain or loss and the basis of the new machine?

• A)$0 and $18,000.
• B)$0 and $22,000.
• C)$4,000 and $18,000.
• D)$4,000 and $24,000.
• E)None of the above.

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Definitions:

External Benefits

The positive effects or advantageous consequences of a product or service that are enjoyed by individuals or groups who did not directly purchase or consume the product or service.

Pigouvian

Relating to taxes or policies introduced to correct the effects of negative externalities in the market.

Public Park

A space, whether natural, partially natural, or man-made, dedicated to recreational activities for humans or the conservation of wildlife and natural ecosystems.

Optimum

The most favorable condition or level for growth, reproduction, or success.