Question

In June 2019, Sue exchanges a sport-utility vehicle (adjusted basis of $16,000; fair market value of $19,500) for cash of $2,000 and a pickup truck (fair market value of $17,500). Both vehicles are for business use. Sue believes that her basis for the truck is $17,500. Is Sue correct? Why or why not?

Answer 1

No I think you should include gain in new basis

Step-by-step explanation:

Sports utility vehicle

fair market value=19,500

Exchanged in

pickup truck=17,500

Cash=2,000

Total 19,500

Basis for the truck is $17,500 but she did not consider gain (Amount realized-Adjusted basis )

=$3,500