Your supervisor has asked you to research the following situation concerning Owen and Lisa Cordoncillo. Owen and Lisa are brother and sister. In May 2018, Owen and Lisa exchange business pickup trucks. Lisa gives up a blue pickup truck with an adjusted basis of $2,000 and a fair market value of $6,000. In return for this property, Lisa receives from Owen a red pickup truck with a fair market value of $5,500 and cash of $500. Owens adjusted basis in the truck he exchanges is $2,500. In March 2019, Owen sells the blue pickup truck to a third party for $5,800.

Required: Go to the IRS website. Locate and review Publication 544, Chapter 1, Nontaxable Exchanges. If you go to Like Kind Exchanges between related persons, this should assist you. Write a file memorandum stating the amount of Owen and Lisas gain recognition for 2018. Also determine the effect, if any, of the subsequent sale in 2019.