Calculations for "New Basis on Like-Kind Exchange Property with No Boot"
Gain/Loss Realized: |
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Amount realized | = | Fair market value of auto received - Adjusted basis of auto given up |
| = | $20,000 fair market value of new auto - ($35,000 cost - $12,000 depreciation) |
| = | $20,000 fair market value of new auto - $23,000 adjusted basis of old auto |
| = | $3,000 loss |
Gain/Loss Recognized: |
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Loss recognized | = | $0 (Realized loss is never recognized in like-kind exchanges.) |
Basis of New Property: | = |
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New basis | = | Adjusted basis of property given up |
| = | $23,000 + $0 |
| = | $23,000 |
Alternate calculation: $20,000 FMV new property + $3,000
deferred loss = $23,000 basis of new property.
Choice "D" is correct. The basis for the new auto is $23,000, the adjusted basis of the old auto ($35,000 cost - $12,000 accumulated depreciation).Choice "b" is incorrect. $12,000 is amount of accumulated depreciation on the old auto.
Choice "a" is incorrect. $20,000 is fair market value of both the old auto and the new auto.
Choice "c" is incorrect. $35,000 is the original cost of the old auto.
