McDonald exchanged an old asset with a $90,000 tax basis and a $125,000 FMV for a...
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McDonald exchanged an old asset with a $90,000 tax basis and a
$125,000 FMV for a new asset worth $25,000 and $100,000 cash. If the exchange is nontaxable, compute McDonald realized and recognized gain and tax basis in the new asset. |
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| Realized Gain ? | A | |||||||||||
| Recognized Gain ? | B | |||||||||||
| Tax Basis ? | C | |||||||||||
Homework Answers
A) Realized Gain = New asset worth+cash received -FMV of asset = 25000+100000-125000=0
B) Recognized Gain = Net asset worth + cash received- value of old asset on tax basis =25000+100000-90000= Rs. 35000
C) Tax basis= Rs. 35000 is taxable in hands of McDonald and value of new asset is booked at Rs. 25000 and depreciation is to be charged in new asset
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