Teresa, a self-employed consultant, traded in her old computer for a new model. In addition to trading in her old computer, Teresa paid $7,000 for the newer model. Other relevant information about the trade-in is shown below:
Cost of original computer traded in $8,000
Adjusted basis of original computer at $1,000
date of trade-in
List Price (FMV) of new computer $10,000
Trade-in allowance (FMV) for old computer $ 3,000
Teresa's basis in the new computer is:
1) $1,000
2) $7,000
3) $ 8,000
4) $ 10,000
5) none of the above