The Taylor Corporation acquires a large boring machine in exchange for two of its smaller boring machines.The large machine has a fair market value of

$108,000.The smaller machines are valued at $92,000, so Taylor pays an additional

$16,000 on the exchange.

a. If the basis of the smaller machines is $69,000, what is Taylor’s realized and recognized gain or loss on the exchange?

b. What is the deferred gain or loss?

c. What is its basis in the large machine?

AppendixLO1