[AR]

Hello,

Question related to gain recognition in a non-monetary exchange transaction.

Facts: Transaction has commercial substance. Boot is given. FV of asset given/received is more than the BV of asset given. Should a gain be recognized?

From the Wiley Study Guide, the understanding I got that a gain should be recognized in the amount of (FV-BV) (if FV of asset given is known) or in an amount of (FV-BV-Boot) if the FV of asset received is known.

But Wiley Focus notes clearly states that no gain should be recognized if boot is given.

Which of the two is the correct treatment?

Thank you in advance.
Amrita

[CPA so close, so far away]

Whenever a transaction has commercial substance, a gain or loss must be recognized.

[AR]

Okay, thank you.

[Mike J]

I agree w CPA so close

The concern is that the exchange is frivolous (eg just to facilitate sales to inflate #s, cash flows do not change, etc). IMO thus an exchange has/has no “commercial substance” (on its own).

[Author]

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