Rosilyn trades her old business-use car with an adjusted basis of $13,000 and an outstanding loan liability balance of $2,000 for a new business-use car valued at $9,000 plus $3,000 cash from Bob's Auto Sales and Loan Company. Bob assumes Rosilyn's loan balance. What is Rosilyn's realized gain on the transaction?
A)$- 0 -
B)$1,000
C)$2,000
D)$3,000
E)$5,000

Question

Quizplus · Accepted Answer

Rosilyn's realized gain is calculated by subtracting the adjusted basis of the old car from the sum of the value of the new car and the cash received, plus the loan balance assumed by Bob. This is ($9,000 + $3,000 + $2,000) - $13,000 = $14,000 - $13,000 = $1,000.

Rosilyn Trades Her Old Business-Use Car with an Adjusted Basis