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Entering a like-kind exchange in Lacerte

by Intuit•1• Updated 2 months ago

Before you start:

You can also record like-kind exchange transactions on the Dispositions screen. For more information, see
here.
If you use the Like-Kind Exchange Wizard, the program calculates the basis of the new asset and creates the new asset for you. The program populates the input fields with the data you entered into the wizard.
Mandatory input fields in the Like-Kind Exchange Wizard are marked with an asterisk.
Input fields and wizard screens are organized into the following sections: Property Received, Cash and Loan Amounts, Other Property Given Up, and Choosing How to Create New Assets.
Do not enter a value for both "Cash Given" and "Cash Received". Enter the net value as either "given" or "received."
For steps on how to use the Like-Kind Exchange Wizard for exchanging one asset for multiple, see here.

Using the Like-Kind Exchange Wizard:

On the Detail tab, select the Depreciation input screen.
In the Asset list, select the asset.
In the Section list, select General Disposition Information.
Click the Like-Kind Exchange (8824) button.
Click the Like-Kind Exchange Wizard button, or enter data directly into the available input fields.

Video on using Like-Kind Exchange Wizard:

How the Like Kind Exchange Wizard Calculates Basis for New Asset

When using the Like-Kind Exchange Wizard from the Depreciation (4562) screen in Lacerte, and selecting the Simplified Method, the program will create a new asset with a calculated basis for the new asset.

To determine how Lacerte has calculated the new asset basis:

The calculation of basis of the asset received in an exchange starts with the basis of the property given up after depreciation taken (A.K.A. adjusted basis)
- FMV of the new asset does not enter into the basis calculation.
The wizard will then take the adjusted basis and add any down-payments and/or financing taken for the new asset
- This is seen as cash given in a case when the original property was not worth as much as the new asset
Then, the FMV of any other property given up in the exchange (boot) is added to the total from above
The total of all the numbers above becomes the basis of the new property

Example:

A vehicle with an original basis of $18,500 had $15,000 of depreciation taken. The adjusted basis for this asset is:

The vehicle is exchanged for a new version of the same vehicle with a FMV of $22,000
The original vehicle was worth $5000 trade-in so an additional $10,000 in financing must be taken with a $5,000 down payment
The trade is still $2,000 short so a trailer is also given-up in the deal with a FMV of $2,200

Calculation:

Adjusted basis of property given up
+ Down payment
+ Financing
+ Additional property given up
= basis of new property

$3,500 adjusted basis
+ $5,000 down payment
+ $10,000 financing
+ $2,200 FMV of additional property given up
= $20,700 Basis of new asset

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