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Dennis contributed business assets to a new business in exchange for stock in the company. The exchange did not qualify as a tax-deferred exchange. The fair market value of these assets was $370,000 on the contribution date. Dennis’s original basis in the assets he contributed was $218,000, and the accumulated depreciation on the assets was $136,500. What is the business's basis in the assets it received from Dennis?

Respuesta :

Answer:

The amount of $370,000 will be the business basis in the assets.

Explanation:

The tax deferred exchange is the 1031 exchange which allows the business to sell one or more appreciated assets mostly the rental or the real estate and defer the payment in the capital gain taxes through acquiring one or  more replacement properties.

So, Dennis contribute the business asset for the tax deferred exchange whose market value is $370,000 but unfortunately, the exchange did not qualify for the same. Therefore, the business's basis in the assets which is received from Dennis amounts to $370,000 because the exchange is fully taxable transaction so full fair market value will be received.

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