Rosilyn trades her old business-use car with an adjusted basis of $13,000 and an outstanding loan liability balance of $2,000 for a new business-use car valued at $9,000 plus $3,000 cash from Bob's Auto Sales and Loan Company. Bob assumes Rosilyn's loan balance. What is Rosilyn's recognized gain on the transaction?
A)$- 0 -
B)$1,000
C)$2,000
D)$3,000
E)$5,000

Question

Quizplus · Accepted Answer

Rosilyn's recognized gain is calculated as the amount realized ($9,000 new car + $3,000 cash + $2,000 liability assumed by Bob = $14,000) minus the adjusted basis of the old car ($13,000), resulting in a $1,000 gain.

Rosilyn Trades Her Old Business-Use Car with an Adjusted Basis