Question

A. In 2018 Dee buys a new large truck, cost $100,000. In 2020 Dee realizes that they would be much better off worth two small trucks that cost $35,000 each. They arrange to trade the old truck plus $5,000 for two smaller trucks. At that time the truck is worth $65,000.

B. Instead of trading the old truck in Dee sells the old truck to Dealer A for $65,000 and takes the check to Dealer B and give him the check and swipes his credit card for $5,000.

C. If the old truck was worth $75,000 Dee trades the old truck for two new small trucks and $5,000 in cash.

D. Same as C but instead of cash Dee is given a credit for $5,000 on service and repair for any of its trucks.

Compue Dee’s basis in new truck, and any taxable gain or loss.

Answer 1

A. a.Computation of Dee's basis in new truck

Particulars	Amount(in $)
Basis of relinquished property	65,000
+cash paid	5,000
Basis in new property	70,000

b. taxable gain or loss=basis in old property- FMV in new property

=$(70,000-70,000)=$0

B.a.Dee's basis in the new truck = $(65000+5000)=$70,000.

b. Computation of gain or loss

=Amount received from Dealer A - FMV of the property

=$(65,000-65,000)

=0

C.a. Dees basis in new truck-

Particulars	Amount(in $)
Basis of relinquished property	75,000
+cash paid	5,000
Basis in new property	80,000

b. Taxable gain or loss

=  basis in old property- FMV in new property

=$(75,000-70,000)=$5,000(loss)

d.a. Computation of Dee's basis

Particulars	Amount(in $)
Basis of relinquished property	75,000
+liabilities taken over	5,000
Basis in new property	80,000

b. Taxable gain or loss

=  basis in old property- FMV in new property

=$(75,000-70,000)=$5,000(loss)