Simba327 wrote:

- quote -

Your understanding is faulty. A sale followed by a purchase
does not constitute an exchange.

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Simba327 wrote:

- quote -

From the information in your post, the client does not have
a like-kind exchange.

Generally you are considered to have a like-kind exchange
when you go to an automobile dealership and trade-in your
current vehicle for a new vehicle. I would assume the
backhoe would be treated similarly if it is traded-in at a
backhoe dealer for a new backhoe.

A deferred like-kind exchange occurs when the seller
deposits the proceeds from the sale directly into a holding
account with a "qualified intermediary" not related to the
seller. The seller then has a fixed amount of time to
purchase an asset similiar to the one sold.

In this case it sounds like the 2 assets were sold, the
seller took possession of the cash and used it to buy a new
asset. The client did not set up a planned deferral.

What you have are 2 new assets on the books for $23,000 and
whatever was paid for the truck that are eligible for
Section 179, a $5,000.00 ordinary gain on the old backhoe
and $9,197.00 ordinary loss on the old truck for a total net
deduction of $27,197.00 plus the cost of the truck.

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Simba327 wrote:

- quote -

First and foremost, you need to figure out just why you
think these are like exchanges? You DID say they sold and
THEN bought, didn't you?

ChEAr$$,
Harlan Lunsford, EA n LA
6 Apr 2005

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I have a client who had a backhoe and took a sec 179
deduction in 2002 for the entire amount ($12,000). They
also had a 2001 pick up truck, that they did a partial 179
in 2000, leaving them with a $15,197 depreciable basis.
This year they sold both pieces of equipment. The backhoe
for $5000, and the truck for $6000.

They then took the $11,000 and bought a new $23,000 backhoe
($11,000 down, financed the rest).

Separately, they also bought a new pick up, a 2005.

My understanding is that both of these are like kind
exhanges. Truck for truck and backhoe for backhoe.

When I put the info into Lacerte, the basis for the van is
higher on the 8824 than the cost, but the depr basis is the
same as the old truck (only good for another year).

The backhoe basis from the 8824 is $21,000 after the
worksheet is done, but there is no depreciable basis because
they took the section 179 back in 2002.

I think this is all correct, but I'd like a second opinion.
If I report them on the 4797, I can get them a refund, but
if I do an 8824 they owe quite a bit (they don't believe in
estimated tax payments).

Thanks
Dan

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