Hi,
When you retire an asset, you can indicate it is a like-kind exchange. The value of the asset you receive would be entered in the 'non-cash' proceeds area. If you received some cash, this is known as 'boot' in the tax world, any gain would be recognized to the extent of boot received. If you are using the tax method on your corporate book, the system will generate an entry that will defer the gain. For example. Let's say your old car cost 12,000 and you had taken 11,250 of depreciation.
1. your basis in the old car is $750
2. you trade the car in and your trade-in value is $2,500
3. you get an $18,000 car you had to pay $15,500 for
4. you realized a gain of $1,750 ($2,500 - $750)
5. Because it's a like-kind exchange, the journal entry is
Debit Accum 11,250
Debit Proceeds 2,500
Credit Cost of old car 12,000
Credit Deferred Gain 1,750
When you book the new car your initial cost is 18,000, go into the book and hit the ITC/Cost button
Use the Misc Cost adjustment field and enter -1,750.
Your beginning 'cost' of the new car will be $16,250
You would then need to make the journal entry
Debit Deferred Gain 1,750
Credit asset clearing account 1,750
It's ugly, but it's doable.
You will be reducing your basis in the new car by the amount of the deferred gain. I don't know how GAAP deals with this kind of thing, but that's how the IRS would handle it.
Kind regards,
Leslie
