Question

Which of the following situations involving an exchange of business property exemplifies a fully nontzxable exchange
1.miranda traded a commercial refrigerator plus 5000 for Patricia commercial refrigerator
2.lois exchanged a commercial sewing machine for Edwina commercial sewing machine plus 5000 in cash
3.harold traded an improved lot for Oliver's rental house .Oliver paid 2.000 expense incurred with the exchange
4.david traded his delivery van with Marcia for a printing press

Answer 1

Solution: harold traded an improved lot for Oliver's rental house .Oliver paid 2.000 expense incurred with the exchange

Explanation: To be exempted as fully non-taxable exchange as a like-kind exchange, it must hold for investment or business purposes both the property it receive and the property it transfer. If it involves the receipt of money these will be partially nontaxable . Exchange expenditure as paid by Haroldcan be added to the basis of the like-kind property received