Agnes has a machine used in her manufacturing business which she purchased 4 years ago for $250,000. She has properly taken $200,000 of depreciation to date. She wants to buy a new machine for $300,000. She could either trade in her old machine and receive $60,000 towards the cost of the new machine or sell the old machine for $60,000 to her friend. Based on the like-kind exchange rules, she wants to know which would result in a smaller recognized gain for tax purpose.

1. She should trade it in because then she would not have to report the gain as a result of the like-kind-exchange rules.
2. She should sell it to her friend because this would result in the least amount of taxes.
3. It does not make a difference for 2022, since machinery and equipment do not qualify for like-kind exchange tax benefits.
4. It does not make a difference because she does not have a gain on the disposition of old machinery.