Sarah exchanges a yellow bus (used in her business) for Tyler\'s gray bus and so
ID: 2588229 • 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 Gray bus Equipment $10,320 5,160 3,870 $25,800 20,640 7,740 a. Sarah's recognized gain is $ 18,060 | X . Her adjusted basis in the gray bus is $( 20,640 X , and her adjusted basis in the equipment is 7,740V Feedback Check My Work If the taxpayer in a like-kind exchange gives or receives some property that is not like-kind property, recognition may occur. b. Tyler's recognized gain is 16,770 X , and his adjusted basis in the yellow bus is 25,800XExplanation / Answer
a) Amount realized (20640+7740) $ 28,380 Adjusted basis $ (9,030) Realized gain $ 19,350 Recognized gain $ 19,350 Sarah's recognized gain is $19,350. Her adjusted basis in the grey bus is $5160 and her adjusted basis in equipment is $3870. b) Amount realized (20640+7740) $ 25,800 Adjusted basis $ (10,320) Realized gain $ 15,480 Recognized gain $ 3,870 Tyler's recognized gain is $3870 and his adjusted basis in the yellow bus is $10,320. Tyler also qualifies for 1031 like-kind exchange treatment. The giving of boot typically does not trigger the recognition of realized gain. However, since the equipment is appreciated boot, the amount of the appreciation of $3870 recognized, so his adjusted basis for the yellow bus is $10320.
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