Answer:
Leker's tax basis in the acquired van is;
b. $17,000
Explanation:
<em>Step 1: Determine adjusted tax basis</em>
adjusted tax basis=$20,000
<em>Step 2: Determine the realized gain or loss from the exchange</em>
The realized gain or loss can be defined as the amount of gain or loss from the sale of an asset. In our case, it can be expressed as;
G/L=R-A
where;
G/L=realized gain or loss
R=realized value from the exchange
A=adjusted tax basis
In our case;
G/L=unknown
R=FMV+C, and;
F.M.V=fair market value=$10,000
C=cash=$3,000
R=10,000+3,000=$13,000
A=$20,000
replacing;
G/L=(13,000-20,000)=-$7,000
Leker has a realized loss on this exchange of $7,000
<em>Step 3: Determine tax basis on acquired van</em>
Leker's tax basis on the acquired van=Fair market value of the acquired van+postponed loss
where;
Fair market value of the acquired van=$10,000
postponed loss=$7,000
replacing;
Leker's tax basis in the acquired van=(10,000+7,000)=$17,000
Leker's tax basis in the acquired van=$17,000
