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Holding Period and Basis in Like-Kind Exchange

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Jim Junction purchased a truck for business on November 17, 2009, for $40,000. On July 21, 2010, he exchanged the truck for another truck in like-kind exchange. The new truck had a fair market value of $42,000. When does the holding period on the new truck begin and what is its basis?

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IRC section 1231(a)(1) states that "No gain or loss shall be recognized on the exchange of property held for productive use in a trade or business or for investment if such property is exchanged solely for property of like kind which is to be held either for productive use in a trade or business or for investment. " IRC section 1231(d) states that ...

Solution Summary

After citing and discussing the Internal revenue Code provisions regarding the holding period and basis in like-kind property, this solution illustrates how to apply the law.