Sarah exchanges a yellow bus (used in her business) for Tyler\'s gray bus and so
ID: 2546339 • Letter: S
Question
Sarah exchanges a yellow bus (used in her business) for Tyler's gray bus and some garage equipment (used in his business). The assets have the following characteristics:
Adjusted Basis
Fair Market Value
Yellow bus
$10,880
$27,200
Gray bus
5,440
21,760
Equipment
4,080
8,160
a. Sarah's recognized gain is $. Her adjusted basis in the gray bus is $, and her adjusted basis in the equipment is $.
b. Tyler's recognized gain is $, and his adjusted basis in the yellow bus is $.
Adjusted Basis
Fair Market Value
Yellow bus
$10,880
$27,200
Gray bus
5,440
21,760
Equipment
4,080
8,160
Explanation / Answer
A) Fair value of asset received : Gray bus 21760 +Equipment 8160
= 29920
Adjusted basis : 10880
Realised gain : 29920 -10880 = 19040
**Out of $ 19040 ,$ 8160 is a Recognised gain (boot received ,equipment ) so postponed gain : 19040 -8160 = 10880
Adjusted basis in gray bus : Fair market value - gain postponed
= 21760 - 10880
= $ 10880
Adjusted basis for equipment : $ 8160
B)Amount realised : 27200 yellow bus fair market value
Adjusted bais of asset given : 5440+4080 = 9520
Realised gain $ 27200-9520 = $ 17680
Recognised gain :appreciation in boot : 8160-4080 =4080
postponed gain : 17680-4080 = 13600
Adjusted basis in yellow bus : 27200-13600 =$ 13600
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