Mary traded furniture used in her business to a furniture dealer for some new furniture.Mary originally purchased the furniture for $45,000 and it had an adjusted basis of $20,000 at the time of the exchange.The new furniture had a fair market value of $40,000.Mary also gave $4,000 to the dealer in the transaction.What is Mary's adjusted basis in the new furniture after the exchange?

Question

Quizplus · Accepted Answer

In a like-kind exchange, the adjusted basis of the new property is the adjusted basis of the old property plus any additional money paid. Therefore, $20,000 (adjusted basis of old furniture) + $4,000 (cash paid) = $24,000.

Mary Traded Furniture Used in Her Business to a Furniture