Arlington originally purchased the machinery for $60,000 and it had an adjusted basis of $28,000 at the time of the exchange. The new machinery had a fair market value of $35,000. Arlington also received $2,000 of office. Arlington's gain or loss recognized on the exchange is $2,000.The gain recognized is the lesser of the fair market value of the boot ($2,000 of office equipment) or realized gain of $9,000
