Like Kind Exchange - Business Autos

[MarkM]

My client traded in a 100% business use delivery truck for another delivery truck (which will also be 100% business use).

Here are the numbers:

FMV of new truck - $27,940

Rebate on new truck - $4,500

Trade-In value of old truck - $1,100

Adj basis of old truck - $2,785

I calculate the adjusted basis of the new truck at $24,675:

FMV of new truck $27,490

+ Adj basis of old truck 2,785

- Rebate on new truck (4,500)

- Trade in value on old truck (1,100)

Adj basis of new truck $24,675

Is this correct?

[jainen]

>>Adj basis of new truck $24,675<<

That's right, based on $27,490 (but note that you have given us a transposed number.) This is an interesting exchange because they have to defer a LOSS on the old truck. A simple way to check your calculation is to add the loss to the effective purchase price (FMV minus rebate).

[MarkM]

Sorry about that. The correct purchase price is $27,490.

I don't know why he did this (actually, I don't know why anyone does trade-ins). I had another client that donated a company auto with a pretty high adjusted basis and took a bath on the difference between what the charity sold the care for and his adjusted basis.

[jainen]

>>I don't know why anyone does trade-ins<<

Have you ever tried to show and sell a thousand-dollar truck?

[OldJack]

My client traded in a 100% business use delivery truck for another delivery truck (which will also be 100% business use).

Here are the numbers:

FMV of new truck - $27,940

Rebate on new truck - $4,500

Trade-In value of old truck - $1,100

Adj basis of old truck - $2,785

I calculate the adjusted basis of the new truck at $24,675:

FMV of new truck $27,490

+ Adj basis of old truck 2,785

- Rebate on new truck (4,500)

- Trade in value on old truck (1,100)

Adj basis of new truck $24,675

Is this correct?

Not likely correct.

FMV and rebate, as such, have nothing to do with the new basis. The new basis is the net book value of the old vehicle plus what ever is paid (or will be paid by recorded liability) for the new vehicle. The liability or amount owed can be only the principle (tax purposes) or full payments including interest (tax purposes & GAAP).

.

[jainen]

>>new basis is the net book value of the old vehicle plus what ever is paid<<

That's what MarkM actually did, albeit a bit awkwardly.

[OldJack]

>>new basis is the net book value of the old vehicle plus what ever is paid<<

That's what MarkM actually did, albeit a bit awkwardly.

Well there you go again assuming what someone said when what they said was not what you might think they said.

[TAXBILLY]

Huh? :~))

taxbilly