@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.
@nhholley
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.
