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alexander6
Level 3

Farm vehicle expenses not calculating correctly in year of sale

We purchased a new truck in 2003 for $14,635, and have used it 100 percent for our farm business.  In the year of purchase, we took a section 179 election of $3,776, and a special 50% depreciation allowance of $1917.  Since then, we've been taking regular depreciation each year, and as of 2008, the vehicle had a book value of $0.  We've always used the actual expenses method to deduct operating expenses.

 

On July 3, 2020, we sold the truck for $4,000.  We used the truck 100 percent for farm business up until July 3.  From January 1, 2020 to July 3, 2020 we had expenses of $365.  TurboTax is calculating the business use percentage for this vehicle as 58% because it was only used for a portion of the year, and is reducing the actual expenses allowed by that percentage, so that instead of being able to write off $365, it is saying we can only write off $213 of the $365 actually incurred.  This doesn't seem right. 

 

Also, where prompted to enter the sales price, Turbo Tax states "Because you stopped using this vehicle for this business in 2020, we need to know the business portion of the sales price you received for this vehicle and any expenses of sale, such as advertising or commissions.  Normally that would be whatever someone paid you for it - times this vehicle's business use percentage (58.33%)."

 

I tried changing the date of sale to 12/31/2020, and this has the intended effect of showing 100% business use and allowing deduction of $365 business expense, and it also has the surprising and considerable effect of lowering our "federal tax due" by about $1,120.  That can't be solely related to having $152 more deductible expenses.  I'm stumped as to what's going on.

1 Best answer

Accepted Solutions
AmeliesUncle
Level 13

Farm vehicle expenses not calculating correctly in year of sale

Go back through the questions and look for the one that asks if you kept track of personal miles.  Say YES.

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3 Replies
AmeliesUncle
Level 13

Farm vehicle expenses not calculating correctly in year of sale

Go back through the questions and look for the one that asks if you kept track of personal miles.  Say YES.

alexander6
Level 3

Farm vehicle expenses not calculating correctly in year of sale

Thank you sir!  That seems to have fixed the issue, but I'm not exactly sure what I've learned 🙂  I hate black boxes - I would prefer that Intuit give the user a bit more explanation as to what's going on behind the scenes.  For example, at the question asking whether you kept records of your personal miles, if there was perhaps a little "i" button that you could click and it would explain the options: 1) if you click yes, TurboTax will ..., or 2) if you click no, TurboTax will...etc.  Anyway, enough bitchin' thanks again for your help.

AmeliesUncle
Level 13

Farm vehicle expenses not calculating correctly in year of sale

Yeah, that question messes up a lot of people.  I'm sure there are COUNTLESS wrong tax returns because of that question.   The question is probably meant to 'make it easy' to prorate part-year usage for people who did not keep track of things well.  But it is extremely unclear what it does and screws up so many tax returns.

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