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Bob78614 writes: I assume that such a tax-free exchange does not change the basis of either taxpayer. Can you confirm that my assumption is correct? --Bob

That's right. Basis will be increased only if gain is recognized, either fully because the exchange does not qualify for tax-free treatment or partially because "boot" (nonqualifying property, such as cash) is received, in which case basis would be increased to the extent the taxpayer received boot.

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