Question

Mateo bought machinery on December 4, 2014. On June 4, 2015, he traded this machinery for other machinery in a nontaxable exchange. On December 6, 2015, Mateo sold the machinery he got in the exchange. His holding period for this machinery began on which date?i. December 4, 2014ii. December 5, 2014iii. June 4, 2015iv. June 5, 2015

Answer 1

Mateo's holding period for the machinery he obtained in the exchange began on June 4, 2015.

Step-by-step explanation:

Mateo's holding period for the machinery he obtained in the exchange began on June 4, 2015.

The holding period for an asset received in a nontaxable exchange starts on the same day as the holding period for the asset that was traded. In this case, Mateo traded the machinery on June 4, 2015, so his holding period for the new machinery begins on the same day.

Answer 2

Answer: ii. December 5, 2014

Step-by-step explanation:

The Holding period for assets begins a day after the sale and ends on the day the asset is sold.

Mateo bought this asset on December 4, 2014 which means that his holding period began a day later, on the 5th of December 2014 and ended on December 6, 2015.