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Like kind exchanges
user-200 - 08/23/2018, 12:38 am

Why is the basis used in this problem instead of the FV? I thought the basis of the new property plus is the FV of the old plus any cash received...

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RAIN - 08/23/2018, 6:16 pm

The basis of the new property has nothing to do with the taxpayer, that is the cost of the other party. In a like-kind exchange, always start with the basis of the property transferred and make adjustments from there.

The basis of the replacement (like-kind) property is generally the same as the basis of the property transferred, with the following adjustments:

Increase to Basis

  • Boot paid (money, FMV of other property transferred, net liabilities the taxpayer assumes)
  • Exchange expenses the taxpayer pays
  • Any gain recognized on the exchange

Decrease to basis

  • Boot received (money, FMV of other property received, net liabilities the other party assumes)
  • Any loss recognized on the exchange
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Carlos-56246 - 10/12/2018, 3:18 am

Good evening,
To find out the basis of the new property in a like-kind exchange, I always use an alternate method which is the FMV of the new property received minus any deferred gains plus any deferred losses. The FMV of the property received is $80,000 and there is a deferred gain of $3,000 ($22,000 - $19,000) because non was recognized which gives me a tax basis of $77,000 ($80,000 - $3,000). Could you please explain why this method does not work for this problem?