Scenario: XZY Corp trades its used machinery with a value of $29,500 and an adjusted basis of $18,742 ($30,615 historical cost less $11,873 of accumulated depreciation) to the dealer for new machinery valued at $27,500. To equate the value of the property exchanged, the dealer also pays XZY Corp $2,000. What gain or loss does XZY Corp realize on the exchange and what gain or loss does XZY Corp recognize on the exchange?
What is the character of XZY Corp's $2,000 gain?
What if: Suppose the same facts as above, except that XZY Corp's adjusted basis in the machinery was $29,000. What amount of gain would XZY Corp recognize on the exchange?