In January 2013,Keyaki Construction Company exchanged an old truck,which cost $54,000 and had accumulated depreciation of $18,000,for a new truck having a fair market value of $65,000.In connection with the exchange,Keyaki paid $35,000 in cash.What is the tax basis of the new truck?

Question

Quizplus · Accepted Answer

The tax basis of the new truck is calculated as follows:
Fair market value of new truck: $65,000
Cash paid: -$35,000
Carrying amount of old truck: -$36,000 ($54,000 cost - $18,000 accumulated depreciation)
Taxable gain on exchange: $4,000 ($65,000 fair market value - $61,000 adjusted basis)
Tax basis of new truck: $71,000 ($65,000 fair market value + $6,000 taxable gain)

In January 2013,Keyaki Construction Company Exchanged an Old Truck,which Cost