Becker says in pass key on page F2-37 the following
The fair value of assets given up is assumed to be equal to the fair value of assets received, including any cash given or received in the transaction.............................So it follows that fair value has cash given up or received..ok
Now...on the same page it is written...The cash given up does not enter into the calculation of gain on exchange, which is fair value less book value.
and GAIN== FV - BV
So cash given up enters into gain calculation..? confused
Joined: 31 Mar 2011
Online Status: Offline Posts: 22
Posted: 01 Apr 2011 at 15:25 | IP Logged
I agree, the wording and explanations in all books are poor to say the least.
Pretty easy though (Of course double check my logic). What they are saying in an ultra confusing way is that the party giving up the cash will never recognize gain. They may potentially recongize a loss, but never a gain. The party that receives the cash will recognize gain.
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Topic: Exchanges Commercia substance-maddening
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