The general rule regarding the exchanged basis in a like-kind exchange is:
A)The basis is equal to the fair market value of the new property.
B)The basis is equal to the fair market value of the old property.
C)The basis is equal to the adjusted basis of the old property.
D)The basis is equal to the cost basis of the old property.
E)All of thesE.The general rule is that the property receives a carryover basis from the old property.

Question

Quizplus · Accepted Answer

The basis of the new property received in a like-kind exchange is generally equal to the adjusted basis of the old property. This is known as a carryover basis. Option A is incorrect because fair market value is used to determine the amount of gain or loss in the exchange, but not the basis of the new property. Option B is incorrect because the basis is not based on the fair market value of the old property. Option D is incorrect because the cost basis of the old property is not used to determine the basis of the new property. Option E is incorrect because the answer is C only.

The General Rule Regarding the Exchanged Basis in a Like-Kind