Exchange of personal use property

[manyhappyreturns]

I have a client who, jointly with a friend several years ago, bought an airplane for $19,000 and a hangar for $14,000. The hangar is on airport property and they pay monthly rent to keep it there, although the friend moved out of the area a couple of years ago. Recently, my client has become unable fly due to health issues and he wants to trade his interest in the airplane for his friend's interest in the hangar. Neither the plane or the hangar have ever been used for business purposes, although my client wants to rent out the hangar for profit.

So, he is wondering what the tax consequences are for both him and his friend if they make the trade. I told him I believed it would be considered $2,500 capital gains for his friend although he wouldn't be able to claim a capital loss, but I wanted to check for input here on the forum because I'm not completely sure of my answer. Any input would be greatly appreciated.

Thank you!

[OtisMozzetti]

The friend is exchanging his personal-use property, a half interest (for which he seemingly invested $7000 = $14,000/2) in the hanger for the remaining half interest in the airplane. As of several years ago, the half interest in the airplane was apparently worth $19,000/2 = $9500. We still need to know what is today's fair market value for the half interest in the airplane. That would allow us to determine the capital gain or loss which the friend realizes on his half interest in the hangar.

EA in California

Interestingly, it would seem TO ME that the airplane is worth more than twice what a half interest in the airplane is worth, and hangar is worth more than twice what a half interest in the hanger is worth.