Trade of a tractor

[DixieEA]

Farmer trades old tractor in for new one,
cost $139000
depr claimed 58133
179 exp deduct 25000
Adj Basis = 55687

allowed $101000 for old tractor by dealership

new tractor cost $162893
amt financed 61994 of new tractor, no cash paid at purchased

Basis of new tractor = Adj basis of old tractor $55687+ amt financed $61994=$117681

Question: Is this trade a like kind exchange that should be reported on form 8824? and if so
should there be any recapture of depr of form 8824?

[Roland Slugg]

Is this trade a like kind exchange that should be reported on form 8824?

Yes.

... and if so should there be any recapture of depr?

No. There is only depreciation recapture when there is recognized gain, and since there was no boot received, there is so reportable gain.

The new tractor will have a "split basis" consisting of the remaining basis in the old tractor plus the additional basis in the new tractor. The old tractor will continue to be depreciated as if were still owned and in use, and the additional amount paid for the new tractor will be treated like a separate, newly acquired asset. If he wishes to do so, the taxpayer can elect to treat the entire basis as a new asset, thus eliminating the split basis. See Regs 1.168(i)-6(i). The election is made on F-4562.

Btw, your figures don't quite add-up, so check them carefully before finalizing everything. (The $55,687 amount may really be $55,867, an apparent transposition.)

[DixieEA]

tractor

Thanks Roland, that is what I thought and you are correct in the math