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Irene owns a truck costing $15,000 and used for personal act

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Irene owns a truck costing $15,000 and used for personal activities. The truck has a $9,600 FMV when it is transferred to her business, which is operated as a sole proprietorship.

a. What is the basis of the truck for determining depreciation?

b. What is Irene's realized gain or loss if the truck is sold for $5,000 after claiming depreciation of $4,000?

Beach Corporation owns a computer with a $34,000 adjusted basis. The computer is used in the company's trade or business. What is the realized and recognized gain or loss for each of the following independent transactions where the computer is exchanged for?

a. A used computer with a $70,000 FMV plus $16,000 cash.

b. A used computer with a $18,000 FMV plus $7,000 cash.

c. Marketable securities with a $61,000 FMV.

Solution Preview

Irene owns a truck costing $15,000 and used for personal activities. The truck has a $9,600 FMV when it is transferred to her business, which is operated as a sole proprietorship.

a. What is the basis of the truck for determining depreciation?

b. What is Irene's realized gain or loss if the truck is sold for $5,000 after ...

Solution Summary

Irene owns a truck costing $15,000 and used for personal activities. The truck has a $9,600 FMV when it is transferred to her business, which is operated as a sole proprietorship.

a. What is the basis of the truck for determining depreciation?

b. What is Irene's realized gain or loss if the truck is sold for $5,000 after claiming depreciation of $4,000?

Beach Corporation owns a computer with a $34,000 adjusted basis. The computer is used in the company's trade or business. What is the realized and recognized gain or loss for each of the following independent transactions where the computer is exchanged for?

a. A used computer with a $70,000 FMV plus $16,000 cash.

b. A used computer with a $18,000 FMV plus $7,000 cash.

c. Marketable securities with a $61,000 FMV.

$2.19