Final answer:
The factors used to determine basis and the advantages and disadvantages in relation to non-taxable exchanges, capital assets, and 1231 assets.
Step-by-step explanation:
The factors used to determine basis for non-taxable exchanges, capital assets, and 1231 assets include the original purchase price, improvements made to the assets, and depreciation taken on the assets.
The advantages of non-taxable exchanges include deferring tax liability and preserving capital gains. However, the disadvantage is that the basis of the new asset is carried over from the previous asset.
For capital assets, the advantage is the potential for long-term appreciation and income generation, while the disadvantage is the potential for capital loss.
For 1231 assets, the advantage is the ability to offset gains and losses, while the disadvantage is the potential recapture of depreciation as ordinary income.