The following is an illustration of a nonmonetary exchange with boot that is accounted for in accordance with ASC 845-10-30-6 (as discussed in ARM 1300.2). For illustration purposes, Example 1 assumes that the transaction is appropriately accounted for at carryover book basis, while Example 2 assumes that the transaction is accounted for at fair value.
ASSUMED TRANSACTION
Entity A enters into an agreement with Entity B to exchange assets. Entity A gives up an asset with a book value of \$600,000 and fair value of \$1,000,000. Entity B gives up an asset with a book value of \$350,000 and fair value of \$800,000. In addition, Entity B pays Entity A \$200,000 in cash (boot).
 Entity ARecipient Entity BPayer Book value of nonmonetary asset given up \$ 600,000 \$ 350,000 Fair value of nonmonetary asset given up (1,000,000) (800,000) Boot received (paid) 200,000 (200,000) Fair value of nonmonetary asset received 800,000 1,000,000
The boot represents 20% of the estimated fair value of the assets given up by Entity A and Entity B (\$200,000 of boot in relation to \$1,000,000 fair value of the transaction). Assume the fair value of the asset surrendered is more clearly evident than the fair value of the asset received.
Based on an evaluation of the criteria in ASC 845-10-30-3, the transaction is appropriately accounted for at carryover book basis.
EXAMPLE 1
Entity A would account for the boot as shown in the following table.
 Accounting basis Book value of asset given up \$ 600,000 Less: portion of cost of asset deemed sold (\$200,000/\$1,000,000x\$600,000) 120,000 Retained portion of cost of asset given up ascribed to asset received \$480,000 Calculation of gain - Boot received in cash \$ 200,000 Less: portion of cost of asset deemed sold (above) 120,000 Recognized gain on exchange \$80,000
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Because the entity paying the monetary consideration is precluded from recognizing a gain on a transaction in the scope of ASC 845-10-30-6, Entity B would record the carrying value of the nonmonetary asset given up plus the boot paid, as shown in the following table.
 Book value of asset given up \$350,000 Add: boot paid 200,000 Total cost ascribed to asset received \$550,000
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EXAMPLE 2
If the entire transaction is assumed to be appropriately accounted for at fair value, the gain for each party would be based on the aggregate fair value of the assets given up (assuming that the fair value of the asset surrendered is more clearly evident than the fair value of the asset received), compared to their book value. This would result in a gain upon exchange of \$400,000 for Entity A and \$450,000 for Entity B, as illustrated in the following table.
 Entity A Recipient Entity B Payer Fair value of asset given up \$1,000,000 \$ 800,000 Boot paid - 200,000 Total value of assets given up \$1,000,000 \$1,000,000 Book value of assets given up (600,000) (550,000) Gain on exchange \$ 400,000 \$ 450,000
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