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Depreciation: Adjusted basis calculation of new asset in like-kind exchange

In the
Asset Disposal
 tab of each disposed asset, when following Notice 2000-4 and Regulation 1.168(i)-6T, the
Adj Tax Basis
 field is calculated with the following items:
  • Adjusted basis of original asset +
  • Exchange expenses incurred +
  • Cash paid +
  • FMV of other property given up +
  • (Liabilities assumed - Liabilities (including mortgages) given up)
The following fields can also have an impact of the adjusted tax basis:
  • Cash received:
     Cash received will reduce the number of exchange expenses in the equation, but not under zero. If the exchange expenses are more than the cash received, then the basis will be reduced by the amount of cash received. If the cash received is more than the exchange expenses, then the basis will be reduced by the full amount of the exchange expenses.
  • FMV of other (not like-kind) property received:
     This value has the same impact on the equation as cash received (explained earlier).
  • FMV of other non sec 1245 like-kind property received:
     This figure will net against exchange expenses. If exchange expenses are more than the FMV, then it will reduce the basis by the amount of FMV. If the FMV is more than the exchange expenses, then the difference between the 2 figures is added into the basis.
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