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In June 2020, Sue exchanges a sport-utility vehicle (adjusted basis of $122,240; fair market value of $152,800) for cash of $22,920 and a pickup truck (fair market value of $129,880). Both vehicles are
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In June 2020, Sue exchanges a sport-utility vehicle (adjusted basis of $122,240; fair market value of $152,800) for cash of $22,920 and a pickup truck (fair market value of $129,880). Both vehicles are for business use. Sue believes that her basis for the truck is $129,880. Is Sue correct? Why or why not?

User Jomoos
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Answer:

Basis $122,240

Recognized gain $22,920

Step-by-step explanation:

Based on the information given Sue is NOT CORRECT Because her basis for the truck is NOT $129,880 reason been that she did not correctly apply Boot § 1031 rule and therefore her BASIS for the truck will be the adjusted basis of the amount of $122,240 and she has a RECOGNIZED GAIN of the cash amount of $22,920 on the exchange.

User Sameera
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