Your supervisor has asked you to research the following situation concerning Owen and Lisa Cordoncillo. Owen and Lisa are brother and sister. In May 2016, 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 2017, Owen sells the blue pickup truck to a third party for $5,800.

Locate and review Publication 544, Nontaxable Exchanges. Please explain and calculate the amount of Owen and Lisas gain recognition for 2016. Also determine the effect, if any, of the subsequent sale in 2017.

Lisa Sizemore, a taxpayer in the 10 percent tax bracket, purchased stock as an investment on July 11, 2015. She sold the stock on July 9, 2016, 3 days before qualifying for the long-term holding period. If Lisa had waited until July 12, 2016 to sell the stock, she would have qualified for the 0 percent capital gains tax rate. Instead, the sale will now be taxed at ordinary income rates. Upon realizing this, Lisa has told you that she will fudge the sale date to July 12. She says to you, Whats the big deal? Its just 3 days. What would you say to Lisa?