Robbie and Mike Exchange Machinery in a Qualified Like-Kind Exchange

question 56

Essay

Robbie and Mike exchange machinery in a qualified like-kind exchange.Robbie's old machine,which originally cost $42,000,has an adjusted basis of $26,000.His old machine is worth $32,000.Since the machine Mike is trading is worth only $27,000 (Mike's basis is $18,000),Mike will even up the exchange by giving Robbie $5,000 in cash.
a.What is Robbie's realized gain (loss)on the machine?
b.What is Robbie's recognized gain (loss)on the machine?
c.What is the character of Robbie's gain or loss on the machine?
d.What is Robbie's basis in his new machine?

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Definitions:

Grasping Reflex

A neonatal reflex that occurs when something touches the infant’s palms. The infant responds by grasping tightly.

Rooting Reflex

A newborn’s built-in reaction that occurs when the infant’s cheek is stroked or the side of the mouth is touched. In response, the infant turns its head toward the side that was touched, in an apparent effort to find something to suck.

Sensory Information

Data received through sensory organs (e.g., eyes, ears, skin) that is processed by the brain to understand the environment.

Correct Posture

The alignment and positioning of the body in a manner that reduces stress on the musculoskeletal system.