Nontaxable exchanges - Like kind exchange of a vehicle
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Explain how realized and recognized gain or loss for a personal-used asset is assessed.
Mike owns a car that he uses exclusively for personal purpose. Its original cost was $26,000, and the fair market value is $12,000. He exchanges the car and $18,000 cash for a new car.
a. Calculate his realized and recognized gain or loss.
b. Calculate his basis for the new car.
c. Determine when his holding period for the new car begins.
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Solution Summary
The solution discussion centers on the application of the like-kind exchange rules with regard to tax reporting. The reporting differences are noted between personal use and business use autos. The solution shows the calculations for the responses.
Solution Preview
Using the like kind reporting rules would be correct if the use of the vehicle had changed to business use, but it didn't. The transaction is non-reportable because it is personal and because there is a ...
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