What is the FMV of New Truck?

[SFA]

Am doing a like-kind-exchange. Old truck traded in for a brand new truck at the dealership.

From the dealer's pink sheet:

The MSRP is $30,890. (Manufacturer's Suggested Retail Price)

Less: "dealer discount" $895 and "rebate" $1,000.

So the actual price starts at $28,995.

After that, the trade-in and other costs are calculated to reach the final cash amount paid.

QUESTION: is the FMV $30,890 or $28,995?

The difference is factored into the "deferred gain" calculation. Probably doesn't matter, but still, just wondering what others are doing.

Thank you in advance for any input from this group.

[schirallicpa]

cost is recorded at what was actually given up or paid.  dealer incentives are not considered.  if he paid cash of 28995, that's what you record as cost basis.  Now in a trade-in, have to consider the book value of what he gave up, plus cash that he paid.  

 

[Catherine]

1 hour ago, SFA said:

QUESTION: is the FMV $30,890 or $28,995?

I believe it is the $28,995 is the starting point - because if this had been a cash-only transaction, that would have been the price paid i.e., the fmv.  After you take that starting point, then you have to deal with the trade-in of the old truck and possible depreciation recapture on it, and all the other adjustments.  

But start from the final cash price.

[SFA]

Thanks Catherine. That's what I did. Seems like nobody is paying the MSRP, so that is not really the FMV.

[WITAXLADY]

yes - I would use the $28...  think if it was not traded, and paid in cash - you would use the $28,

[Pacun]

If these are unrelated people, what you paid after the discounts is the FMV.At that point, the FMV and the cost are the same. After you pull out from the dealer's parking lot, the FMV of the car is less than the cost. So technically, you paid $28K, but if you don't put the truck in service until the following day, depreciation should be calculated at the FMV which will be less than $28K, but no one does that.

 

[Catherine]

3 hours ago, Pacun said:

but no one does that

Because we have easier ways to hurt ourselves...