Question

Arlington LLC exchanged land used in its business for some new land. Arlington originally purchased the land for $28,000. The new land had a fair market value of $35,000. Arlington also received $2,000 of office equipment in the transaction. What is Arlington's gain or loss recognized on the exchange?

Answer 1

Arlington LLC's gain recognized on the exchange is $7,000.

Step-by-step explanation:

To determine Arlington LLC's gain or loss recognized on the exchange, we need to compare the fair market value of the new land received with the original cost of the land exchanged. The fair market value of the new land is $35,000, while the original cost of the land exchanged is $28,000. Therefore, the gain recognized on the exchange is the difference between the fair market value and the original cost, which is $35,000 - $28,000 = $7,000.

In addition to the land, Arlington LLC also received $2,000 of office equipment in the transaction. However, this equipment does not factor into the calculation of gain or loss on the exchange, as it is considered a non-monetary asset.

Therefore, Arlington LLC's gain recognized on the exchange is $7,000.

Answer 2

The correct answer here is $2000.

Step-by-step explanation:

Given information -

Original value of asset - $28,000

Fair market value - $35,000

Equipment received in exchange of transaction - $2000

For taking out the Arlington's gain or loss on the exchange we will select the lesser of the f\given two, which are fair market value of equipment which is $2000 and other one is gain recognized by - $35,000 + $2000 - $28,0000 = $9000, so the lesser of the two is $2000.