Entering a Like-Kind Exchange or an Involuntary Conversion

1. Select the asset that you are disposing of and go to Asset Detail for that asset.

2. Ensure you have depreciated the asset through the month-end before the exchange.

3. Print the asset information for the Main tab and note the Current Year-to-Date and Current Accumulated depreciation taken on the asset before the exchange for each book used for tax purposes. These books include the Tax, ACE, AMT, State, and possibly user-defined books. This is essential information you will need when entering the new asset(s) received in the exchange.
4. Select the Dispose an Asset task on the navigation pane. The system displays the Asset Disposal window.
5. In the Disposal Method field, select Like-Kind Exchange: Post-1/2/2000 (or Involuntary Conversion: Post-1/2/2000).
6. Complete the Asset Disposal window.

In Step 2(a), enter the portion of the newly acquired asset treated as a continuation of the asset given up in the exchange. Perform this step whether or not boot was paid.

1. Select the Add an Asset task from the navigation pane.
2. In the Description field, enter a description of the newly acquired asset.

3. In the Acquired By field, select the Exchange or Conversion option button to indicate the asset was acquired in an exchange transaction.

Note: Selecting the Exchange or Conversion option button tells the system that this asset should not appear on any reports run before the date the asset was received in the exchange.

4. Enter the property type used for the original asset.

5. In the books used for tax purposes, enter the identical Placed-in-Service Date, Acquisition Value, Depreciation Method, and Estimated Life as for the original asset (that is, the asset given up in the exchange). For the ACE Book, if you have already changed the Emulate Book field to "AMT: Post-1993," apply the instructions in this paragraph. Otherwise, see the "ACE Book" section below.
6. In the Beginning Date field, enter the month-end before the exchange occurred. For example, if the exchange occurred on October 15, 2023, enter September 30, 2023 (assuming a monthly accounting cycle).
7. In the Beginning Year-To-Date field, enter the depreciation amount taken on the original asset in the year of the exchange. This is the information calculated above in Step 1 when you disposed of the original asset. The Beginning Year-to-Date depreciation is the amount of depreciation taken from the first day of the disposal year through the Beginning Date entered in step 6.

8. In the Beginning Accumulated field, enter the depreciation amount taken on the original asset plus the amount entered in the Beginning Year-to-Date field above. For example, if the exchange occurred on October 15, 2023, enter the depreciation taken from the original asset’s placed-in-service date through September 30, 2023.

9. Select the Save Asset button to save the information.

    

ACE Book

If the ACE book’s Emulate Book option is NONE on the Book Defaults tab of the New Company (or Edit Company) window, make the following changes in the ACE book when entering the newly acquired asset.

When entering the portion of the newly acquired asset that is treated as a continuation of the asset given up in the exchange, you must do the following in the ACE book:

1. Change the Depreciation Method from NO to OC (Own Calculation).
2. In the Beginning Date field, enter the month-end prior to when the exchange occurred. (This is the same date as entered in the Tax book.)
3. In the Beginning Year-To-Date and the Beginning Accumulated fields, accept the default entry of zero.

In Step 2(b), enter the portion of the newly acquired asset that is treated as a new asset. This step is necessary only if boot is paid, or if you are entering the newly acquired asset in the Internal book for GAAP purposes. See the Financial Books section at the end of this topic.

1. Select the Add an Asset task from the navigation pane.
2. In the Description field, enter a description of the newly acquired asset.

Note: To link this asset to the first asset, use the Description field and/or other general information fields. This is important because the two asset records represent one physical asset. If this asset is disposed in the future, you must locate and dispose both asset records.

3. In the Placed-in-Service Date field, enter the date on which the exchange occurred.
4. In the Tax book(s), enter an appropriate depreciation method and recovery period based on the new placed-in-service date.
5. In the Tax book(s), enter an Acquisition Value equal to the basis in the newly acquired asset less the adjusted basis in the original asset. This amount is generally the same as the cash paid for the new asset. If only like-kind property was exchanged (that is, no additional payment was made), enter an Acquisition Value of $0 and NO in the Depreciation Method field.

Note: Do not enter anything in the Beginning Depreciation fields (Beginning Date, Beginning Year-to-Date, and Beginning Accumulated Depreciation).

6. Select the Save Asset button to save the information.