Gain/loss on trade in of vehicle and basis of new vehicle

[Dave19471]

I used a 2017 Ford F250 from June 2017 to October 2019.  I traded in the 2017 for a 2019 F250 in October 2019.

The original cost of the 2017 is $66,812 and the accumulated depreciation to October 2019 is $64,917, including bonus depreciation of $33,406 taken in 2017.

The purchase price of the 2019 is $68,994. The dealer gave me $43,000 trade in on the 2017, but there was a loan on it of $49,193. Also, there was a factory rebate of $3,500.

What is the taxable gain, if any, on the trade-in and what is the basis of the 2019?

[AmeliesUncle · Accepted solution]

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@Dave19471 wrote:

The original cost of the 2017 is $66,812 and the accumulated depreciation to October 2019 is $64,917, 

The dealer gave me $43,000 trade in on the 2017,

The purchase price of the 2019 is $68,994.   Also, there was a factory rebate of $3,500.

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Your Basis in the 2017 is $66,812 minus $64,917.

Your taxable gain for the 2017 is $43,000 minus your Basis.

Your Basis in the 2019 is $68,994 minus $3,500.

Because the trade-in was after 2017, the Like-Kind Exchange rules don't apply (at least not for Federal purposes) so the trade-in of the old vehicle is treated as a sale and does not affect the Basis of the new vehicle.

[Dave19471]

Thank you.