Circle Co. owns equipment 1 (FMV = $50,000, AB = $15,000) that it uses in its business. Circle Co. exchanges equipment 1 for equipment 2 (FMV = $40,000) and stock worth $10,000 in a like - kind exchange.

17. What is Ci rcle Co.s r ecognized gain or loss on the exchange? Note: you should calculate realized gain/loss first, but the question asks only for recognized gain/loss.

18. What is Circle Co.s basis in equipment 2?

19. What is Circle Co.s basis in the stock?

Note: the realized gain that was not recognized in Q17 did not disappear; it is built in to equipment 2 after the exchange (FMV of Equip 2 minus Circle Co.s basis should equal any realized but not recognized gain from Q17.