Samantha exchanges a truck used in her business with Phyllis for another truck.The basis of Samantha's old truck is $25,000,FMV is $33,000,and she gives Phyllis cash of $7,000.Phyllis's basis in her truck is $35,000 and its FMV is $40,000.What is Samantha's adjusted basis in the new truck she receives?
A)$25,000.
B)$32,000.
C)$33,000.
D)$40,000.

Question

Quizplus · Accepted Answer

To determine Samantha's adjusted basis in the new truck, we need to consider the total value of what she gave up (old truck and cash) and the total value of what she received (new truck).

The value of what she gave up is the basis of her old truck plus the cash she gave Phyllis:

$25,000 + $7,000 = $32,000

The value of what she received is the fair market value of Phyllis's truck:

$40,000

Since Samantha's adjusted basis in the new truck is the total value of what she received minus the total value of what she gave up, we can calculate it as:

$40,000 - $32,000 = $8,000

Therefore, the answer is B) $32,000.

Samantha Exchanges a Truck Used in Her Business with Phyllis