Vehicle used 100% for business. Depreciation

[mudtech61]

I purchased a vehicle in April of 2019 for 100% business use for approximately $50,000. The vehicle is/was titled in my name not business but was never used for personal purposes. Sold the vehicle in October 2024 for $29,500 and paid off with additional personal funds of $36,000. Claimed depreciation for vehicle on 2024 tax for entire year (forgot). What do I need to do now to correct oversight and avoid possible issue with IRS?

Also, since vehicle was titled in my name and not in the business name would it be considered a personal asset used for business purposes or is this going to be another potential problem? I am sure that some of you tax gurus can figure out how much depreciation was paid versus the amount for which the vehicle sold as I obviously took a loss on the sale but the vehicle was an ongoing expense that was unnecessary so I decided to sell it before it devalued further.

JME

[tagteam]

Your post is somewhat confusing. 

First of all, did you mean 2023 rather than 2024?

Also, what business? Is there a business entity, such as an S corporation? Are you a sole proprietor? What?

Finally (for now), have you not been taking depreciation deductions since 2019?

[mudtech61]

tagteam,

Depreciation was taken out in for vehicle on tax filed in 2024 for tax year 2023.

The vehicle has been depreciated on the business tax returns for tax filing years 2019,2020,2021,2022 and 2023. Tax year 2024 is still in progress and yet to end for filing.

The business is a single member LLC with a sub chapter S provision. It is not a sole proprietorship.

The vehicle was an individual purchase primarily to use for business but not titled in the business name in case it could be used for personal reasons should the need arise. The personal use issue never transpired.

Hope this helps but the business never owned the vehicle, it was only purchased to fill a business purpose that never developed.

mudtech61 

[tagteam]

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@mudtech61 wrote:

Depreciation was taken out in for vehicle........

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On the S corporation's return (1120-S) for the years in question?

[mudtech61]

Yes, the 1120-S form and the form 4562 for the depreciation detail.

[tagteam]

Can we presume you're the sole shareholder? This may be a nonissue.

[mudtech61]

Correction, sold the vehicle in October 2023 NOT 2024.

Sorry if this caused confusion.

[mudtech61]

My wife and I, we live in a community property state so she is considered a part owner of the business and and property in my/our names. She is shown on the articles as a Manager but essentially it is a single member LLC.

mudtech61

[tagteam]

Understood except you stated earlier that there was an S corporation election. Is that the case?

[mudtech61]

tagteam,

Sorry to be so confusing and offering information piecemeal but I am not a tax professional and don't claim to be one. I looked through the returns and found that the entire amount of the vehicle purchase was depreciated in 2019. The vehicle was put into business use in April of 2019 and sold in October of 2023. The original purchase price was $51,050 (approximately) and the sale price was $29,500 (approximately). The business is an LLC with a sub chapter S. 

[tagteam]

Then you have $29,500 of gain (Section 1245 recapture) since the basis is now $0.

[mudtech61]

tagteam,

Registered with the Sec. of State as an LLC. Taxed as an S corporation. Does that sound right?

[mudtech61]

OK, but it cost me more than $29,500 to clear the note so how can there be a gain. Had to clear the title or would not have been able to sell vehicle. 

Any advice to offer to get it straight?

[tagteam]

Yes, but what you mean by "clear the title"? 

If you had a higher payoff amount (i.e., paid off a loan) that does not factor into the gain/loss calculation.

[mudtech61]

The title was in my name, the loan that was used to purchase the vehicle was in my name also. The loan had to be paid off prior to selling the vehicle after being depreciated for the business use for 4.5 years. 

Do I have a gain of the difference between the amount depreciated for the final months of 2023 and the amount of total depreciation taken for the 2023 tax year which was 2 months? I am totally confused!