Chapter 9, Problem 7AP

This year, Neil Inc. exchanged a business asset for an investment asset. Both assets had a $932,000 appraised FMV. Neil’s book basis in the business asset was $604,600, and its tax basis was $573,000.

1. a. Compute Neil’s book gain and tax gain assuming the exchange was a taxable transaction.
2. b. Determine Neil’s book and tax basis of the investment asset acquired in the taxable exchange.
3. c. Compute Neil’s book gain and tax gain assuming the exchange was a nontaxable transaction.
4. d. Determine Neil’s book and tax basis of the investment asset acquired in the nontaxable exchange.