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I. Basics a. Financial accounting: Gain recognition depends on concept of "conmercial
substance"/losses are always recognized immediately b. Tax accounting: Deferral of gains and
losses is mandated for "like-kind" exchanges II. Three key points 1) FMV of everything received
(Tax basis of everything surrendered) REALIZED gain or loss (for tax purposes) 2) Amount of
gain RECOGNIZED never exceeds amount of gain REAL.IZED. 3) FMV of property acquired -
deferred gain + - deferred loss Tax Basis of Property Acquired III. What is boot? a. Property
exchanged in an otherwise like-kind exchange that is not like-kind (usually cashI) b. Three
scenanios i. No boot exchanged (ie. both assets exchanged have the same FMVI) ii. Boot paid -
triggers no gain recognition ii. Boot received - triggers gain recognition up to the value of the
boot 1) See Key Point #2 ! IV. Let's work problem 60 (page 11-45) to illustrate these rules.

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