Pauline's Pastry Shop decides to remodel its offices this year. As part of the remodeling, Pauline's trades furniture with a cost of $12,000 that had been expensed in the year of purchase (Section 179 expense election) for new furniture costing $22,000. Pauline's receives a $5,000 credit (instead of a cash receipt) for the old furniture and borrows the remaining $17,000 from Easy Finance Company.
a. What is Pauline's realized gain or loss on the old furniture? Maybe 0
b. What is Pauline's recognized on the exchange?
c. What is Pauline's deferred gain on the exchange?
d. What is the basis of the new furniture?