Smith Corporation exchanges equipment (fair market value $500,000, adjusted basis $300,000) that has a $50,000 loan against it for equipment owned by Brown Corporation (fair market value $700,000, adjusted basis $400,000) that has a $250,000 loan. Each corporation assumes the other's loan in the exchange. What are Smith's and Brown's recognized gains on the exchange, respectively? a. $0, $0 b. $200,000, $0 c. $200,000, $300,000 d. $200,000, $200,000
Smith Corporation exchanges equipment (fair market value $500,000, adjusted basis $300,000) that has a $50,000 loan against it for equipment owned by Brown Corporation (fair market value $700,000, adjusted basis $400,000) that has a $250,000 loan. Each corporation assumes the other's loan in the exchange. What are Smith's and Brown's recognized gains on the exchange, respectively? a. $0, $0 b. $200,000, $0 c. $200,000, $300,000 d. $200,000, $200,000
Chapter14: Property Transactions: Capital Gains And Losses, § 1231, And Recapture Provisions
Section: Chapter Questions
Problem 37CE
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General accounting
Transcribed Image Text:Smith Corporation exchanges equipment (fair market value $500,000, adjusted
basis $300,000) that has a $50,000 loan against it for equipment owned by Brown
Corporation (fair market value $700,000, adjusted basis $400,000) that has a
$250,000 loan. Each corporation assumes the other's loan in the exchange. What
are Smith's and Brown's recognized gains on the exchange, respectively?
a. $0, $0
b. $200,000, $0
c. $200,000, $300,000
d. $200,000, $200,000
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