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Wallstreet Esq.
Wallstreet Esq., Tax Attorney
Category: Tax
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Experience:  10 years experience
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I traded-in a 5th wheel trailer costing $39,000 with a loan

Customer Question

I traded-in a 5th wheel trailer costing $39,000 with a loan balance of $28,000 for a new 5th wheel costing $65,000. I was give a trade-in credit of $20,000. I paid $15,000 down and had a new loan of $65,000. What is the basis of my new 5th wheel. These assets are personal in nature -- no depreciation. The loan was rolled over into new loan
Submitted: 1 year ago.
Category: Tax
Expert:  Lev replied 1 year ago.

You wrote - new 5th wheel costing $65,000 - so that is your purchase price - correct?
If so - that is your basis.

Customer: replied 1 year ago.
Wouldn't the basis be the cost of the old 5th wheel ($39,000) + the $28000 (loan balance) - $20,000 (trade-in) + $15,000 down, or $62,000?
Expert:  Lev replied 1 year ago.

The basis is your purchase cost - it doesn't matter HOW that cost is paid - with trade-in value or with a loan or with the cash.
We need to be clear what is your purchase cost?