AMT on Trade-Ins

[Snaggletooth]

With respect to AMT depreciation adjustment when equipment is traded in -

Simple question: Is the difference rolled into a different AMT basis for the new equipment? Or is the difference disgorged in the
year of trade and no adjustment in the new basis?

Well, I posed it as a simple question, but it is not. Better to illustrate:

Bubba has a tractor, Original Cost $10,000 Depreciation $7,000. AMT Depreciation is $5500.
He trades it in on another tractor, and pays $15,000 cash. We know what happens for his "normal" depreciation:
$15,000 cash plus $3000 Book Value of the trade-in results in new basis of $18,000. But what happens for his AMT status?
The above "simple" question can be posed as a choice between the following:

a) $15,000 cash plus $4500 AMT Book Value of the trade-in results in a new basis of $19,500, and AMT depreciation begins
at that point with a higher basis than regular basis.
b) $1,500 difference in imbedded AMT depreciation is immediately written off as an adjustment to Form 6251 in the year of
the trade, thus eliminating the difference in trade-in basis. New basis is thus the same as regular depreciation, $18,000.

How do you treat the above? b)makes for incredibly simpler calculations going ahead into the future but I'm not sure it is correct.

[mactoolsix]

Use two 8824 forms - one regular depreciation and the other for AMT

For Regular depr lines 16, 17, 18 & 25 = 18,000

For AMT lines 16 & 17 = 18,000
Line 18 = 19,500 (AMT Basis)
Line 19 = <1,500> Realized Loss
Line 24 = <1,500> Deferred loss
Line 25 = 19,500 AMT basis of like kind property received

No gain or loss is reported and no form 6251. The new basis for regular & AMT defers any gain or loss.

Mike

[Snaggletooth]

Thank You

I can't imagine what a MacToolSix is, but I guess it's none of my business. Maybe -

"I got a 440-hemi in this thing"
"You can pass anything on the road except a gas station. I've got a Windsor 351"
"Both you guys don't know a good engine when you see it. I got a MacTool Six."

Besides, I am the recipient of a well-thought-out and well-explained response. Not easy to read through a question
and example such as this one and the information is not readily available else.

Thanks again - and forgive my occasional flights of random thought...

[mactoolsix]

I can't imagine what a MacToolSix is, but I guess it's none of my business. Maybe -

"I got a 440-hemi in this thing"
"You can pass anything on the road except a gas station. I've got a Windsor 351"
"Both you guys don't know a good engine when you see it. I got a MacTool Six."

Besides, I am the recipient of a well-thought-out and well-explained response. Not easy to read through a question
and example such as this one and the information is not readily available else.

Thanks again - and forgive my occasional flights of random thought...

Snags - I was a Mac Tool distributor for 28 years. Was 6th in the nation one year, and the mactoolsix anecote has hung on ever since.
Mike

[Snaggletooth]

Thanks

MacTool thanks for the run-down on your handle, and congrats for your success in the Mac arena. We are very happy
you are posting with us - having helped us with some tough topics and good information.

[mactoolsix]

MacTool thanks for the run-down on your handle, and congrats for your success in the Mac arena. We are very happy
you are posting with us - having helped us with some tough topics and good information.

Being new to the tax game with only four years experience, I always receive more than I could ever contribute. Always glad to contribute and grateful for the understanding from this forum.

Mike

[S T]

Wow, Mac - only 4 years experience, you have given some "awesome": information, Glad you are here on the TB Forum.

Sandy