[lam2848]

Hey guys so I’m reviewing nonmonetary exchanges lacking commercial substance and I’m a little confused on one thing. Becker says that if cash is paid then there is no gain (>25%). My question is, if the cash paid is greater than 25% then do we recognize the gain?

[Anonymous]

I'd drop this, and similar questions, in the FAR/REG sections pinned at the top. Also, give me detail about what you are asking. We aren't sitting with you so we need as much detail as possible to explain anything.

[Wannafree]

cash is paid ,no gain.no question of going beyond.If cash received then 25% and more things comes into picture.

[Anonymous]

I actually think this is a very good question, I sometimes get very confused with non-monetary exchanges too. A business transaction is said to have commercial substance when it is expected that the future cash flows of a business will change as a result of the transaction.

If the boot is greater than or equal to 25% of the total consideration, it is a monetary exchange and both parties recognize all gains and losses. I thought this applied only for boot received but I ran into a MCQ where I got the problem wrong because apparently it applies regardless if the boot is paid or received as long as it's 25% of the total consideration. That's the note I made and I would like to get a better clarification on this matter as well.

Thanks,

[lam2848]

@eas0014 I think you're right. I just rewatched the Becker lecture and if the boot paid is under 25% of the total consideration then there is no gain recognized. But if it is over 25% then you recognize the gain. Its confusing but that was my takeaway

[Author]

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