My business vehicle was totaled, but I bought it back from insurance.

[ssmerk]

Hi,

My work truck had a tree fall on it at my house from a storm.  It was damaged to the point the insurance company totaled it,  but it was still drive-able and plenty road safe so I bought it back from them.  How do I report this on my taxes?  Should I list it as sold and that I bought another vehicle for the buy back price I paid?  I had taken a section 179 on this truck the year I bought it and have had it for 6 years.

Thanks in advance!

[ee-ea]

deleted

[ssmerk]

Does anyone have any advice on this?  I understand it is an odd situation and appreciate any help.

Thanks!

[DianeW777]

Report the truck as sold with a selling price the insurance company for the amount they paid you (basically the buy back amount). Follow the steps below to report the sale. This is a taxable event.

The way to report the sale is as follows. You have all the records so it should provide you the detail to move forward.

1. All business miles for all years and then total miles for all years - divide business miles by total miles to arrive at your overall business use percentage for the life of the vehicle. You will use this percentage times the selling price (what the Insurance company paid you or would have paid you)  to arrive at the business selling price. 
2. Calculate the standard mileage rate depreciation portion for the business miles each year if that is the method you used for the expenses each year, or 
   •  A portion of the standard mileage rate is considered depreciation. 
3. If not use the depreciation you actually deducted each year your vehicle was used for your business.
4. When go to the vehicle information under your business you can select 'Sold, disposed of, etc....' then do not indicate it was sold.  You must say 'Yes' it was converted to personal use.  This will eliminate any sales information in the vehicle it self.
5. Once you have completed the information in that section you will follow the steps below to enter your sale:
   1. Go to Less Common Business Situations
   2. Scroll to Sale of  Business Property
   3. On the next screen select Any Other Property Sale
   4. Use the information from step one and the depreciation from step 2 to complete your sale
6. If the personal portion of your vehicle is a loss there is nothing to report for that portion of the sale/trade.  (If there was any personal use)

Next add the truck back to your depreciation schedule for the price they charged you to repurchase as a new asset.  Do not take Section 179 or Special Depreciation because this vehicle will fall under the related party rules. You can use the alternative depreciation system (ADS) for this vehicle using the steps below.

Let's see if we can clarify this for you.  When selecting 'Intangible and Other Property', and 'Other Asset Type' 

1. Continue to complete the asset information on 'Tell us about this Rental Asset'. 
2. Next enter 'Yes' it was always used 100% for business if this applies.
3. You will be allowed to select 5 year as the Asset Class.
4. This option allows you to choose the following Depreciation Method:
   1. 200% Declining Balance (your action assumes this is not what you want to select), or
   2. 150% Declining Balance, or
   3. Straight Line, or
   4. ADS (alternative depreciation system which is SL with MQ or HY convention depending on when you asset was placed in service
   5. The next screen does allow you to enter 5 years as the recovery period 
   6. Continue to select to spread the deduction over several years.
   7. Continue and you will see your depreciation expense after your selection
   8. See most of the screen images below.  (I used rental activity, but the screens will be the same for other business activities)
   9. Keep this information with your tax files.