[jdurham1994]

So, I had a problem pop up where it was dealing with like-kind exchanges with boot/loot.

I thought boot only consisted of Cash and COD. Does it also include any property they give us? (for example, they also gave a trailer that had a FMV of $3500)

So when I went to recognized gain, I thought it was 0 because it is the lesser of realized gain or boot received. However, this question was saying that the $3500 trailer was boot/loot. Which then threw everything off, of course.

Any clarification would be greatly appreciated, as either this question is old and they forgot to update it or I just have been doing it wrong with property received.

Thanks!

[jdurham1994]

Nevermind, I was wrong. I was always under the understanding that it had to be cash or COD. Realized in my notes it says “FMV of non-like kind property” is also considered boot/loot. Oops! Was a little confusing, but got it now.

[Mike J]

First and foremost, remember that only boot causes gain to “kick in”

According to my FAR notes, you have to know if there is economic substance. If there is, you setup the j/e and solve for X. Dr New Asset (FV asset rec'd or FV old asset + cash or addl property received). Dr Cash received / Cr Cash paid. Dr Accumulated Dept. Cr Book Value Old Asset. Cr Gain (plug).

If there is no commercial substance, recognize no gain if the new asset exceeds total of Cash paid + old asset. If new asset exceeds cash received + old assets, you use a two-step formula. (1) New Asset (FV) + Cash Received – Old Asset (Book Value). (2) Mult (1) x Cash Received / New Asset (FV) + Cash Received.

[Author]

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