Pat owns a 1965 Ford Mustang which he uses for personal use. He purchased it four years ago for $22,000, and it currently is worth $27,000. He exchanges it for a 1979 Triumph Spitfire convertible worth $27,000. Pat's recognized gain is $0 and his adjusted basis for the convertible is $22,000.

Question

Quizplus · Accepted Answer

Pat's recognized gain is $0 because it is a like-kind exchange, but his adjusted basis for the convertible should be $27,000, the fair market value of the Triumph Spitfire, not the original purchase price of the Mustang.

Pat Owns a 1965 Ford Mustang Which He Uses for Personal