Question No.5. Tex Fasttalker purchased a compressor used in his business on August 1, 2017 for $200,000. He took $170,000 of depreciation on the compressor. On May 1, 2019, Tex, needing a larger compressor purchased a new Big Red compressor from the Sleazily Implement Company by treading-in his old compressor. The cost of the new Big Red compressor was $500,000, and the dealer gave Tex a $300,000 trade-in for his old compressor so that Tex only had to pay $200,000 cash difference for the new Big Red compressor. (Note: you might consider an I.R.C. 179 election to expense, instead of capitalizing, the purchase of the Big Red compressor). The only cash that was exchanged between the parties was $200,000. (

a) What is/are the transaction(s) as to Tex Fasttalker? Discuss and explain. (Hint: a transaction is an exchange between two or more persons).

(b) What is Texs gain or (loss), if any, upon the above transaction(s)?

What is the character of the gain or loss, on from the transaction(s)?

Explain and support your answer(s). Show your computations - required. Computations only will not be sufficient. Hint - do the computations for each transaction separately.

Space for computations.

Space for written answer.