M traded in her business computer at a local dealer.Her cost in the old machine was $3,500 and her basis was $1,470.She paid $1,500 cash in the trade for a computer worth $4,000.How much is M's recognized gain or loss, and what is her basis in the new computer, respectively?

Question

Quizplus · Accepted Answer

M's recognized gain or loss is $0 because the entire transaction is treated as a like-kind exchange for tax purposes. Her basis in the new computer is $2,970, calculated as her original basis in the old computer ($1,470) plus the additional cash paid ($1,500).

M Traded in Her Business Computer at a Local Dealer