Koch traded machine 1 for machine 2. Koch originally purchased machine 1 for $75,000 and machine 1's adjusted basis was $40,000 at the time of the exchange. Machine 2's seller purchased it for $65,000 and machine 2's adjusted basis was $55,000 at the time of the exchange. What is Koch's adjusted basis in machine 2 after the exchange?

Question

Quizplus · Accepted Answer

In a like-kind exchange, the adjusted basis of the new asset is the adjusted basis of the old asset. Therefore, Koch's adjusted basis in machine 2 is $40,000, which is the adjusted basis of machine 1.

Koch Traded Machine 1 for Machine 2