Grant exchanges an old pizza oven from his business for a new oven.In addition to the old oven,which had a basis of $10,000,Grant pays $4,000 cash and takes out a loan on the new oven for $6,000.The new oven is valued at $22,000.What is Grant's basis in the new oven?
A)$12,000
B)$16,000
C)$20,000
D)$22,000
E)$32,000

Question

Quizplus · Accepted Answer

Grant's basis in the new oven is determined by adding the cash paid and the loan taken out, as well as any other costs associated with the acquisition. In this case, Grant paid $4,000 in cash and took out a $6,000 loan, for a total of $10,000 in additional costs. Adding this to the basis of the old oven ($10,000), the total basis in the new oven is $20,000 ($10,000 + $10,000). Therefore, the correct choice is C.

Grant Exchanges an Old Pizza Oven from His Business for a New