[Steph08]

I have a properties tax question: in determining the amount of boot received, do you net off the amount paid over by the taxpayer?

The reason why I’m confused is I’m seeing different outcomes in 2 questions:

1) The other party agrees to give the taxpayer a trailer worth $3500 in addition to the new auto, and the taxpayer agrees to pay $1000 cash in addition to the trade-in.

Here the $1000 paid over is NOT netted with the $3500 received.

2) The taxpayer agrees to assume a liability secured by the new auto of $1000. The other party also agrees to assume a liability secured by the taxpayer’s old auto of $3500.

Here the $1000 liability assumed is netted with the $3500 = total boot received comes to $2500

Whats the reason for this?

Do we only net when both are cash (or monetary liability)?

Thanks

[Steph08]

Anyone?

[hessmt]

Boot is Cash, NET liability relief, and other non-qualified property:

In the first case, boot received does NOT include liabilities, therefore a gain is recognized to the extent of boot received by the taxpayer, and a loss (disallowed in like-kind-exchange) is realized by the other party.

In the second case, both parties assume debt, only the net liability given or received is treated as boot. Therefore the taxpayer (giving up debt of 3,500) received debt relief (boot) of $2,500 while the other party (giving up debt of $1,000) assumes additional liability and realizes a disallowed loss.

I think the trick for to avoid confusion: In a like-kind-exchange, gain is only recognizable to the extent of boot RECEIVED. and no loss is recognizable.

Edit: It maybe helpful to imagine a SECOND like-kind exchange within the original

[Author]

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