How does a business claim a loss on a vehicle they leased to another company? The other company wrecked it and took the money and spent it. It was still drivable so they drove it until they blew up the motor. It will cost more money than the truck is probably worth to repair it. If I sued and got a judgement they have no money, which render a judgement useless.
check with your insurance agency. you might have coverage that you don't know about. the IRS will not let you claim a deduction for that part of a business loss that is covered by insurance.
He had the truck insured. My insurance does not cover the leased vehicle. He spent the insurance money for the wreck and since it was still drivable kept driving it until he blew up the motor. He left it sitting and stopped making lease payments. Cost of repair is now more than the vehicle would sell for. Can this be claimed as a loss somewhere?
@nhholley wrote:Cost of repair is now more than the vehicle would sell for.
Does that mean you still own the vehicle? You might not be able to do anything until you sell (or officially abandon) the vehicle.
As a side note, if you ever lease out another vehicle, you may consider on requiring the insurance payments to go to YOU rather than the other person.
@AmeliesUncle wrote:
@nhholley wrote:
Cost of repair is now more than the vehicle would sell for.
Does that mean you still own the vehicle? You might not be able to do anything until you sell (or officially abandon) the vehicle.
As a side note, if you ever lease out another vehicle, you may consider on requiring the insurance payments to go to YOU rather than the other person.
You can't do anything until you realize the loss. That would mean taking possession back and either selling, repairing, or scrapping the truck. Assuming you sold it for scrap, you would report that as a disposal of an asset in the normal manner. Suppose the original cost was $40,000, your current adjusted cost basis after depreciation is $5000, and the scrap value is $1000. You have a $4000 loss. (On the other hand, if the vehicle has already been fully depreciated, you have a capital gain (depreciation recapture) in the amount of the selling price, even if it was sold for scrap.)
Remember you have to deal with depreciation and recapture, not the fair market value. You can say "I could have sold it used for $10,000 so I have a loss" but that's not how taxes work. If the truck was fully depreciated, you already deducted the entire purchase price. If you sold it used for $10,000, that would be taxable income to you. If you can only sell it as scrap metal for $500, that is still taxable income to you.
The loss in value is something you might sue the lessee for, but it doesn't change the tax treatment. When you get the vehicle back and dispose of it, you will realize a gain or loss depending on the selling price and the adjusted cost basis after depreciation.