Sam owns a delivery truck which initially cost $20,000. After deducting depreciation of $14,000, Sam negotiated with Dealer to obtain a new delivery truck. As a result of these negotiations, Sam traded in this used delivery truck to obtain a new delivery truck from Dealer worth $22,000. Sam also paid the Dealer $12,000 in cash. Based on well-documented Internet transactions, both parties agreed that the new delivery truck had a fair market value of $22,000. Dealer had purchased this truck from Toyota for $20,000 one month earlier. Sam is in the business of delivering merchandise to stores, and Dealer is in the business of selling new and used trucks. As a result of this transaction, Dealer paid its salesperson a commission equal to 5% of the truck sold to Sam.

1. What are the tax consequences of this transaction to Sam. Discuss all consequences, in detail. If you need additional information that is not presented above, state what that additional information is.

2. What are the tax consequences of this transaction to Dealer? Discuss all consequences, in detail. If you need additional information that is not presented above, state what that additional information is.