In-kind Exchange Property Basis

Realized gain/loss
= (FMV of property received - Boot paid + Boot received) LESS (Old cost - Depreciation)

Recognized gain/loss = LESSOR OF:

• Realized gain (formula above);
• Boot received
• Net relief from liabilities
• Realized LOSS is not recognized (recognized amount is $0)

New property basis
= Adjusted basis of old property + Boot paid + Gain recognized - Boot received

Gift Property Basis

General Rule: Use Rollover (original cost) Basis

Dependent on the Selling Price (SP) value:

• SP > RO: basis is RO ("gain" basis)
• SP < FV: basis is FV ("loss" basis)
• RO < SP < FV: NO BASIS - NO G/L RECOGNIZED ("middle selling price")

RO: $4K
FV: $3K

SP: $3.5K --> NO G/L RECOGNIZED

MACRS Life & Convention

• Computer:
• 5 Years
• Mid-year Convention
• Unless > 40% assets purchased in 4th quarter --> mid-quarter convention
• Office Furniture:
• 7 Years
• Mid-year convention
• Non-residential Estate:
• 39 Years
• Mid-month convention
• Residential Estate:
• 27.5 Years
• Mid-month convention