Sale or Exchange of Trucking Equipment
A sale is a transfer of property for money or a mortgage, note, or other promise, to pay money. An exchange is a transfer of property for other property or services.
You can realize gain or loss when property is sold or exchanged. A gain is the amount you realize from a sale or exchange of property that is more than its adjusted basis. A loss is the adjusted basis of the property that is more than the amount you realize.
First, you must know the basis of your property to determine whether you have a gain or loss from its sale or other disposition. The basis of property you buy is usually its cost. However, if you acquired the property by gift, inheritance, or in some way other than buying it, you must use a basis other than its cost. The adjusted basis of property is your original cost or other basis plus (increased by) certain additions and minus (decreased by) certain deductions. Increases include costs of any improvement having a useful life of more than 1 year. Decreases include depreciation and casualty losses.
The amount you realize from a sale or exchange is the total of all money you receive plus the fair market value of all property or services you receive. The amount you realize also includes any of your liabilities that were assumed by the buyer and any liabilities to which the property you transferred is subject, such as real estate taxes or a mortgage.
Certain exchanges of property are not taxable. This means any gain from the exchange is not recognized, and any loss cannot be deducted. Your gain or loss will not be recognized until you sell or otherwise dispose of the property you receive. To be like-kind exchange, the property traded and the properly received must be both of the following:
• Qualifying property
• Like-Kind property
If the like-kind exchange involves the receipt of money or unlike property or the assumption of your liabilities, you may have to recognize gain. Like-kind properties are properties of the same nature or character, even if they differ in grade or quality. IRS form 8824 is used to reflect any like-kind transactions.
Basis of New Property Received
The basis of the property is generally the same as the basis of the property you transferred. If, in addition to giving up the like-kind property, you pay money in a like-kind exchange, you still have no recognized gain or loss. The basis of the property received is the basis of the property given up, increased by the money paid.
If you would like to discuss this or any other U.S. tax or accounting matter, please feel free to call Gabriel at 773.269.6513 or email Gabriel.firstname.lastname@example.org.
We look forward to hearing from you.
Gabriel Wise, CPA MST
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