A more thorough explanation:

Definition: Sale or exchange refers to a voluntary transfer of property for value, resulting in a gain or loss recognized for federal tax purposes. It can also refer to a transfer of property where the proceeds of a sale are invested in another estate of the same character and use.

Examples:

• When you sell your car to someone else for money, it is considered a sale or exchange.
• If you trade in your old phone for a new one at a store, it is also considered a sale or exchange.
• When a business sells its old equipment and uses the proceeds to buy new equipment, it is a sale and exchange.

The examples illustrate how a sale or exchange involves the transfer of property for value. In the first two examples, the property being transferred is a car and a phone, respectively. In the third example, the property being transferred is equipment. In all cases, the transfer is voluntary and results in a gain or loss for tax purposes.