Normal Ol' Pickup Trade happens every day!

reading code and instructions that I arrive at different numbers depending on interpretation!  Every single figure I need (other than old truck adjusted basis) is on the Dealership invoice! I am trying to fill out the right amounts on the form 8824 Like Kind Exchange.

the dealership paid off.

Bank of America for $36K which BOA wrote directly to the dealer.

the information for clarification:

taxpayer paid $1K in tag title and taxes.

other party = $0.00

party, plus and exchange expenses = $29K (6 + 36- 13)

line 15 and line 18.

I don't think so since the basis of the new truck is $43,000 (6+36+1).

I think, at least as of now:

keep reading code and instructions that I arrive at different numbers depending on interpretation!  Every single figure I need (other than old truck adjusted basis) is on the Dealership invoice! I am trying to fill out the right amounts on the form 8824 Like Kind Exchange.

the dealership paid off.

from Bank of America for $36K which BOA wrote directly to the dealer.

of the information for clarification:

taxpayer paid $1K in tag title and taxes.

other party = $0.00

party, plus and exchange expenses = $29K (6 + 36- 13)

line 15 and line 18.

This is exactly what I thought in December when I did the clients 2011 estimate. But now that I have taken a closer look at the 8824 instructions and other examples, I believe the taxpayer must reduce his basis by the amount of the note that the dealer paid off for him.

I'm not happy about my new revelation because that means I totally screwed up the estimate!

On almost every example I found, the basis of the new asset is calculated as adjusted basis of old asset plus boot. (as you suggest)......but every one of those examples do not address the circumstance where there is a note against the old asset that is assumed by the seller.

Form 8824 instructions show line 18 should consist of the adjusted basis of old asset ($6K) plus the NET amount paid to the other party --the excess, if any of (a) any liabilities you assumed ($0), (b) cash you paid to the other party,($36K) and (c) the FMV of the other (not like-kind) property you gave up ($0) OVER any liabilities assumed by the other party ($13K)

ok, I think you did it right. although maybe line 15 should be $13k, but the number flow yields the same bottom line, I think.

I guess a quick double check might be something like this:

FMV of relinquished property is $23.5k adj. basis is $6k

so you have about $17.5k "excess" depreciation which you can't use again.

New truck cost $49K-$2.5k rebate = $46.5k.

new basis is $46.5k - $17.5k = $29k

I don't know where the $1k taxes, tag, and title fit in with all this, but at least you know $29k is in the ballpark, not $43k.

reading code and instructions that I arrive at different numbers depending on interpretation!  Every single figure I need (other than old truck adjusted basis) is on the Dealership invoice! I am trying to fill out the right amounts on the form 8824 Like Kind Exchange.

the dealership paid off.

Bank of America for $36K which BOA wrote directly to the dealer.

the information for clarification:

taxpayer paid $1K in tag title and taxes.

other party = $0.00

party, plus and exchange expenses = $29K (6 + 36- 13)

line 15 and line 18.

I've looked this over more closely and you do have the correct basis for your new truck, $29,000.

However, there are off-setting errors in the details.

First, assuming the $1,000 for taxes, title and tags is all currently deductible, your down payment was, at most, $10,500 (23,500 -

Your acquisition cost was $46,500 ($10,500 + 36,000) which is also the fair market value of the new truck.

So, line 16 is 46,500 making the realized gain (line 19) be $17,500. Line 24 is also $17,500. Basis of your new truck is $29,000 (29,000 +

Since the entire gain is deferred, line 25 is the same either way.

My apologies for my too quick, inaccurate response.

I agree completely (except line 15 should be zero in my case). I tweeked my numbers slightly because of the Tag, Title and Tax, but the bottom line is the basis of the new truck is about $30K

The true ECONOMIC effect to the taxpayer is that he gave up 6K in adjusted basis plus 36K in cash plus 1K in tt&t, AND the dealer paid off 13K of his old debt.

The "random trade in allowance and rebates offered by the dealer" does affect the deferred gain on the exchange....but NOT the basis in the new asset.

Information from original post:

the dealership paid off.

from Bank of America for $36K which BOA wrote directly to the dealer.

of the information for clarification:

taxpayer paid $1K in tag title and taxes.

Plus the $2,500 Ford Motor Company Rebate applied toward the down payment $13,000. The invoice clearly shows the down payment was 13K. The TT&T will be added to the basis of the new truck.

I agree IF you add the $2,500 rebate. (10.5 + 36 + 2.5 = 49). The invoice shows the sales price of the truck to be 49K (FMV)

So, line 16 is 46,500 making the realized gain (line 19) be $17,500.

plus rebate of 2.5K for a total of 20K

plus 2.5 = 20K

Basis of your new truck is $29,000 (29,000 +

plus the $1,000 Tag, Title and Tax that needs to be capitalized = 30K

Please.....no apologies....I love being able to bounce these ideas off the bright minds on this forum. I hate to admit it, but in the haste of tax seasons past, I am afraid I too quickly jumped to the conclusion the basis of the new vehicle was adjusted basis of old plus boot.....never looking to see if there was a note paid off on the old vehicle. This will be a good lesson for me!

It has also been a very good lesson on the fact that I am looking for four distinct figures when filling out the 8824:

1. The basis of the new property
2. The realized gain from the exchange (which could be very different from #3)
3. The recognized gain from the exchange
4. Whether the recognized gain in ordinary (4797) or deferred

Now couple this with the fact that you must make an election under Section

Now I can see why when asked, by a show of hands, in seminars if preparers are filling out form 8824 and showing a proper like kind exchange when vehicles are traded.....Very few people raise their hands!!!

...

Where ever you add or subtract it, the rebate was a reduction in the price of the truck - a reduction that reflected the fact that the truck's FMV was less than its sticker price. If you had taken the cash the truck's FMV would still have been $46,500, its basis would still have been $29,000 and you would have financed $38,500 instead of $36,000, probably at a higher interest rate.

To me, my down payment is what I give up. If I put $2,500 in my pocket by borrowing $2,500 more from the dealer or the credit union, that is, practically speaking, a separate transaction. Whether I borrow that extra cash or not, I still paid (using your numbers) $10,500 as a down payment. To me, giving up the opportunity to borrow an extra $2,500 (which is what you did) is not increasing my down payment.