6) In Year 9, Ralston exchanged commercial real estate that she owned for other

Question

6) In Year 9, Ralston exchanged commercial real estate that she owned for other commercial real estate plus cash of $50,000. The following additional information pertains to this transaction: Property given up by Ralston Fair value $ 500,000 Adjusted basis 300,000 Property received by Ralston Fair value 450,000 What amount of gain should be recognized in Ralston's Year 9 income tax return? Explain.

7) A taxpayer is trading in an automobile used solely for business purposes for another automobile to be used in his business. The automobile originally cost $35,000 and he has taken $12,000 in depreciation. The old automobile is currently worth $20,000 and the new automobile the taxpayer wants in exchange is worth $20,000. No other cash or property is exchanged in the transaction. What is the gain or loss realized and recognized by the taxpayer on this transaction, and what is the taxpayer’s basis in the new automobile?

8) A taxpayer is trading in an automobile used solely for business purposes for another automobile to be used in his business. The automobile originally cost $35,000 and he has taken $18,000 in depreciation. The old automobile is currently worth $20,000 and the new automobile the taxpayer wants in exchange is worth $22,000. The taxpayer has agreed to pay $2,000 cash in addition to the trade-in. What is the taxpayer's realized and recognized gain or loss on the transaction and his basis in the new automobile received?

9) A taxpayer is trading in an automobile used solely for business purposes for another automobile to be used in his business. The automobile originally cost $35,000 and he has taken $18,000 in depreciation. The old automobile is currently worth $20,000 and the new automobile the taxpayer wants in exchange is only worth $16,500. The other party agrees to give the taxpayer a trailer worth $3,500 in addition to the new auto. What is the taxpayer's gain or loss realized and recognized on the transaction and what is his basis in the new automobile received?

Explanation / Answer

A) Book value of Property given up = 300000

Property received = 450000$

Cash received = 50000$

Accounting entry is

Property A/c Dr 450000

Cash A/c Dr 50000

Property A/c Cr 300000

Profit & Loss A/c Cr 200000 (Profit on sale)

B) Purchase Value od old automobile = 35000$

Dep. already taken in books = 12000 $

Written down Value of automobile in Books = (35000-12000)$

= 23000 $

Accounting entry for exchange is

New Automobile Dr 20000

Profit & Loss A/c Dr 3000 (loss on exchange)

Old Automoble Cr 23000

C)

Purchase Value od old automobile = 35000$

Dep. already taken in books = 18000 $

Written down Value of automobile in Books = (35000-18000)$

= 17000 $

If In addition of above 2000 cash is also paid then accounting entry is

New Automobile Dr 22000

Cash A/ c Cr 2000

Old Automoble Cr 17000

Profit & Loss A/c Dr 3000 (profit on exchange)

D) Receipts

New Automobile = 16500 $

Trailor = 3500 $

Payments

W.D.V of old automobile = 17000 $

Accounting entry is

New Automobile Dr 16500

Trailor Dr 3500

Old Automobile Cr 17000

Profit & Loss A/c Cr 3000 (profit on transaction)

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