Question

Cost of original truck traded in - $20,00 dollars
Fair market value of original truck at trade in date is 4000 dollars
List price of new truck is $25,000
Trade in allowance for old truck is $6000
Business use of both trucks is 100% Compute the basis of new truck?

Answer 1

The basis of new truck is explaned and calculated is as follows:

Condition for 100% use vehicle

If old vehicle is used 100% for business and sunsequently trade for new vehicle, then the basis in new vehicle is basis in old vehicle plus amount paid for new vehicle.

Basis of new truck = Basis in old truck + Amount paid for new truck

=(Orginal Cost of truck - Trade in allowance for old truck) + Amount paid for new truck

= ($20,000 - $6,000) + $25,000

=$14,000 + $25,000

=$39,000

Basis of new truck of new truck is $39,000