Armando owns a pizza parlor. Because his business is declining, he trades his old pizza oven in on a smaller oven that is worth $12,000. The old oven cost $30,000 and has an adjusted basis of $18,000. Because Armando's oven is worth $15,000, he agrees to take the $3,000 difference in olive oil and pepperoni.
a. What is Armando's realized gain or loss on the old oven?
b. How much of the realized gain or loss is recognized on the exchange?
c. What is the character of the recognized gain or loss?
d. How much of the realized gain or loss is deferred?
e. What is the basis of the new oven?