Like kind exchange

[grandmabee]

motorhome for camper. They both 100% business. I not 100% sure yet if this qualifies for the exchange still checking on that. But When I do the 8824 I can't get it to work out correct. the motorhome is fully depreciated so 0 basis. They got a 8000 dollar trade in value when buying the new camper. so if new camper cost 23,000 shouldn't the new basis be 15,000

any help would be appricated

[mcb39]

motorhome for camper. They both 100% business. I not 100% sure yet if this qualifies for the exchange still checking on that. But When I do the 8824 I can't get it to work out correct. the motorhome is fully depreciated so 0 basis. They got a 8000 dollar trade in value when buying the new camper. so if new camper cost 23,000 shouldn't the new basis be 15,000

any help would be appricated

Isn't the purpose of Like Kind Exchange to defer the gain. In that case, wouldn't the basis of the new camper be the full $23000 so as to defer the gain on the "sale" of the motorhome. Anyhow, I don't think you have a like kind exchage here, you have an adjustment of basis on the new camper because you did not "sell" the motor home, but traded it in. Therefore, the adjusted basis of the new camper would be $15000. But, don't take my word as gospel as my brain seems to have turned to mush in the past couple of days.

[joelgilb]

Isn't the purpose of Like Kind Exchange to defer the gain. In that case, wouldn't the basis of the new camper be the full $23000 so as to defer the gain on the "sale" of the motorhome. Anyhow, I don't think you have a like kind exchage here, you have an adjustment of basis on the new camper because you did not "sell" the motor home, but traded it in. Therefore, the adjusted basis of the new camper would be $15000. But, don't take my word as gospel as my brain seems to have turned to mush in the past couple of days.

Basis of the new trade is is $15,000. You take what you actually pay for the new vehicle and then add the basis of the old vehicle to it. In this case 0 + 15=15

as for form 8824, since this is a trade on, I am not sure you need report it here, and even if you are supposed to report it on 8824, I think you can just do an attached itemized schedule and show the basis properly on the 4562 and you will have met any disclosure rules. Bypass the 8824 and just put it on 4562 with the schedule.

JOel

[jainen]

>>since this is a trade on, I am not sure you need report it here<<

That's the whole point of an exchange--you trade for something else. Remember, Section 1031 goes back almost to the beginning of the tax system, and in that long history it has been mostly used for vehicles and equipment, usually with a dealer. The original purpose was to help cash-poor farmers upgrade, but during the Great Depression the IRS enforced it to disallow losses. The widespread application to real estate gains is a more recent development.

Anyway, you must file Form 8824 to defer gain from a 1031 exchange. I agree that $15000 would be the new depreciable basis if this qualifies, but the like-kind categories for personal property are so narrow that you need to look carefully at that.

[grandmabee]

>>since this is a trade on, I am not sure you need report it here<<

That's the whole point of an exchange--you trade for something else. Remember, Section 1031 goes back almost to the beginning of the tax system, and in that long history it has been mostly used for vehicles and equipment, usually with a dealer. The original purpose was to help cash-poor farmers upgrade, but during the Great Depression the IRS enforced it to disallow losses. The widespread application to real estate gains is a more recent development.

Anyway, you must file Form 8824 to defer gain from a 1031 exchange. I agree that $15000 would be the new depreciable basis if this qualifies, but the like-kind categories for personal property are so narrow that you need to look carefully at that.

ok so if it doesn't qualify them would I have a sale and new purchase? That's where I'm confussing myself. Because it was a trade in

[RoyDaleOne]

"Like kind exchanges" include trading one vehicle on/for another for another vehicle.

The only point maybe this is not a like-kind exchange. Your explanation is not clear enough, that is saying an RV was traded on an RV. If an RV was treated on a towed camper, I would guess that the items are not a like-kind subject to the exchange rules. The exchange rules are mandatory not optional.

And, all like-exchanges including vehicles are to be report on 8824. See the instruction to the 8824

[grandmabee]

"Like kind exchanges" include trading one vehicle on/for another for another vehicle.

The only point maybe this is not a like-kind exchange. Your explanation is not clear enough, that is saying an RV was traded on an RV. If an RV was treated on a towed camper, I would guess that the items are not a like-kind subject to the exchange rules. The exchange rules are mandatory not optional.

And, all like-exchanges including vehicles are to be report on 8824. See the instruction to the 8824

Its a motor home and a camper that is put on top of a truck. so not like-kind. then I would treat it 2 separte- a sale and purchase. sale price being the trade in value?

[RoyDaleOne]

You have a taxable exchange, therefore you treat the exchange as a sale and purchase. FMV for the sale, not necssarily the trade-in value because a lot of times this value is inflated and does not reflect the true FMV. The new item is the cash plus the FMV of the old item.

As far as the items not being like-kind, that, is up to your professional judgment.

The IRS has some guidance on its web site www.irs.gov.

[joelgilb]

>>since this is a trade on, I am not sure you need report it here<<

That's the whole point of an exchange--you trade for something else. Remember, Section 1031 goes back almost to the beginning of the tax system, and in that long history it has been mostly used for vehicles and equipment, usually with a dealer. The original purpose was to help cash-poor farmers upgrade, but during the Great Depression the IRS enforced it to disallow losses. The widespread application to real estate gains is a more recent development.

Anyway, you must file Form 8824 to defer gain from a 1031 exchange. I agree that $15000 would be the new depreciable basis if this qualifies, but the like-kind categories for personal property are so narrow that you need to look carefully at that.

Have gotten away without using form 8824 on this one, but Yes I agree that it probably should be reported there. Personally I think ATX has made this form more complicated than it should be though. So I hae (admititedly incorrectly ) sometimes not wasted my time uising 8824 on a simple vehicle trade in.

[jainen]

>>As far as the items not being like-kind, that, is up to your professional judgment.<<

Not entirely. For tangible personal property, you must first look at the NAICS classes, which is exceedingly objective. Only if you don't find the match there, can you consider other factors.

>>I think ATX has made this form more complicated than it should be though.<<

I use ProSeries and Lacerte, and I can assure you it is just as impossible with them. I always do exchanges in pencil on a yellow pad, and then force the correct numbers in the software.

[les grans]

>> I always do exchanges in pencil on a yellow pad....<<

Darn it, jainen, can't we agree on *anything*? Definitely, one *must* do them in pencil (for the obvious reason) but why do you use a yellow pad while I do them on columnar pad? I've always done them on a columnar pad. What, are you a lawyer or something. Get with the program. Yellow pads are so ... so ... whatever! .. :lol:

[RoyDaleOne]

When you do the following is it not using your professional judgment?

"Not entirely. For tangible personal property, you must first look at the NAICS classes, which is exceedingly objective. Only if you don't find the match there, can you consider other factors."

I mean if i trade an F-150 on an F-150 do I really need to look at the NAICS classes, mostly likely not.

And if I look at the classes, do I not still make a judgment as to which class an item belongs?

No tits on a bull around here. LOL

Besides read the posting you will see that the original poster had make a decision that the items were not like-kind and I was commenting that I could not help in that decision.