Like Kind of Exchange for Truck

[Absolut]

Client traded a 05 truck for 06 Truck on 10/20/06

05 Truck cost $25972.53 - $12,290.00 (Depreciation 05 & 06), from Asset Entry worksheet.
Garage gave them $21,000.00 exchange but they owed $25,055.58, which leaves a balance of $4055.58*****

06 Truck Cost $23,998.95 - $2500.00 rebate = $21,498.95 + fees as follows
Vendor's Single Interest Insurance = 55.00
Certificate of Title Fees = $23.00
State of Maine Lemon Law = $1.00
Sellers Documentation Fee = $339.00
Other Charges (Bank loan from 05 Truck) = $4055.58******
So total Amount financed = $25,972.53 (which is exactly what they paid for the 05 truck)

My question is how do you get rid of the 05 vehicle on the Asset Entry worksheet? I have proseries, or do you just change the title to 06 Chevy Truck, leaving things as they are because the price is the same as the 05 Chev.

I've made out the 8824, and it nets down to $18,656.00, which confuses me is this the figure that should go in the cost of the 06 Chev Truck on "a new Asset Worksheet'?

[Absolut]

Chg on 05 Truck original Value

05 Truck cost $34,139.00 - $12,290.00= $21,849.00 this wb Adjusted basis (Depreciation 05 & 06), from Asset Entry worksheet.

Garage gave them $21,000.00 exchange but they owed $25,055.58, which leaves a balance of $4055.58 due on loan*****

06 Truck Cost $23,998.95 - $2500.00 rebate = $21,498.95 + fees as follows
Vendor's Single Interest Insurance = 55.00
Certificate of Title Fees = $23.00
State of Maine Lemon Law = $1.00
Sellers Documentation Fee = $339.00
Other Charges (Bank loan from 05 Truck) = $4055.58******
So total Amount financed = $25,972.53 (which is exactly what they paid for the 05 truck)

My question is how do you get rid of the 05 vehicle on the Asset Entry worksheet? I have Proseries, I thought I could link the 8424 to the Asset Entry Worksheet last year, but I don't see it this year, or do you just change the title to 06 Chevy Truck using $26,822.00 which is the bottom line on the 8824.

Sorry I looked things over again.

[Bird Legs]

Getting rid of truck from Deprn Sched.

Go to the Asset Entry worksheet where the truck is set up.
Scroll down a little ways and you will see a section called dispositions & sales of equipment. Record the disposition date in this box. This will take care of the problem.
It will stay on the Deprn Sched. for 2006, however, when you transfer to 2007 it will be gone.

[jainen]

Ignore the loan

>>$26,822.00 which is the bottom line on the 8824<<

I just don't get it. Why do so many people insist that you can increase basis by using property as collateral for a loan? The basis of the replacement property in an exchange is simply the old adjusted basis plus additional FMV. Ignore the loans; they have nothing to do with basis.

Your client realized a loss on the old truck--Adjusted basis of $21849 minus FMV of $21000. He must defer recognition of that loss by rolling it into the basis of the replacement vehicle. He acquired a new truck worth $21917 (including transaction costs). So obviously he added $917 in new basis, for a total basis of $22766.

That's all there is to it. Your Form 8824 is completely off track, because you are violating one of the fundamental principles of accounting. A loan does not increase basis. Ignore the loan.

[S T]

similar problem

I had a difficult time understanding the auto trade rules, so there was a post.
Here is the link http://www.thetaxbook.com/forums/sho...highlight=auto Bees so graciously stuck with it and helped me out, so maybe it will assist you. It is a real life example, even though I had to correct some numbers a few times.

Sandy