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    Trade of a tractor

    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?

    #2
    Originally posted by DixieEA
    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.)
    Roland Slugg
    "I do what I can."

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      #3
      tractor

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

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