Calculations for "New Basis on Like-Kind Exchange Property with Boot Received (Of Cash)"
Gain/Loss Realized: |
|
|
Amount realized | = | Fair market value of new auto + Boot received - Adjusted basis of auto given up |
| = | $16,500 fair market value new auto + $3,500 cash boot - $23,000 adjusted basis
of the old auto ($35,000 cost - $12,000 accumulated depreciation) |
| = | $3,000 loss |
Gain/Loss Recognized: |
|
|
Loss recognized | = | $0 (Realized loss is never recognized in like-kind exchanges.) |
Basis of New Property: |
|
|
New basis | = | Adjusted basis of property given up - Loss recognized - Boot received |
| = | $23,000 - $0 - $3,500 |
| = | $19,500 |
Alternate calculation: $16,500 FMV new property + $3,000 deferred loss =
$19,500 basis of new property.
Choice "A" is correct. $19,500 is the substituted basis of the new auto [$23,000 adjusted basis of the old auto ($35,000 cost - $12,000 accumulated depreciation) - $0 loss recognized - $3,500 boot received]. Choice "b" is incorrect. $16,500 is the fair market value of the new auto.Choice "c" is incorrect. $23,000 is the adjusted basis of old auto ($35,000 cost - $12,000 accumulated depreciation).Choice "d" is incorrect. $26,500 would be the new basis if the boot of $3,500 was paid, rather than received.
