Leased vehicle for personal/business, purchased, traded in for new vehicle

[epro]

In 2019 I leased a vehicle that was used less than 50% for business. In 2022, I was still using it for both business/personal, but bought the vehicle at the end of the lease. Furthermore, I ended up trading in that vehicle and buying a new one. On top of that, my role in the business has changed and am using the new vehicle 50% or more business. I purchased in the end of November. My question is how I answer the questions on TT. For the old vehicle, I was taking the standard deduction for mileage each year for the lease/purchase. For the new vehicle, I plan on doing depreciation. Right now I am closing out the old vehicle. For the sales price, I am listing the trade-in value I was given times my business percent use. The next window asks for sales price. Is it asking for the purchase price from when I started leasing in 2019? or the sale price I paid in 2022 when I bought for residual value? Thanks for any answers you may have. 

[AbrahamT · Accepted solution]

If you traded-in your old vehicle, the cost or basis of the new vehicle is the cost of the new vehicle adjusted by the basis of the old vehicle. So, the cost really depends on the cost of the new vehicle adjusted by the basis of the vehicle that you are trading in.

To figure out the basis

To do this, take your original purchase price add to it any major improvements you've made to the car (like a new engine) and subtract any depreciation that was allowed or allowable (look at your past tax returns for this).

It would most likely be the price you paid in 2022 since you don't have depreciation on a leased vehicle.

[AmeliesUncle]

It is the price you paid for it when you bought it in 2022.

[AmeliesUncle]

I see you accepted the other "answer" as a solution, but that "answer" is wrong. 

The prior vehicle does NOT affect the Basis of the new vehicle.  That ruled ended several years ago, so the Basis of the new vehicle is it's cost, and the prior vehicle has nothing to do with it.

[epro]

Ok, thanks for the clarification. Here is what I ended up doing. 

On the Sales Price page, I listed 25% of the sales price of the trade-in that the dealership offered since that was the business portion of the vehicle. For the Expense of Sale, I did not have any expenses to report. 

On the Vehicle Cost page, I didn't claim depreciation for this vehicle. So I listed the purchase price of the vehicle in 2022. I had used the vehicle since 2019, but it was a lease at the time. I bought the vehicle in 2022 and so that is the cost I am using. I was told to use the price from 2022 and not the sticker price in 2019 when I leased. Also, when I say vehicle, I am referring to the vehicle that I traded in. I am not using any info for the new vehicle that I purchased. 

The next page says "Let's get the info on your gain or loss basis". This is where I am confused and this is where you said the issue was in the previous response that I labeled as "answer". It says "If you got this vehicle by trading in listed property that you used less than 100% of the time for the business, enter your gain or loss basis. If this doesn't apply to you, or if you started using this vehicle for personal use 100% of the time at any point in 2022, leave these field blank." None of this applies to me and so I am leaving these fields blank. Does that seem right? 

On the Calculate depreciation equivalent page, I entered the depreciation equivalent for the years I had in service. I entered that number in both the Prior Depreciation Equivalent and AMT Prior Depreciation Equivalent. 

When I finished, it says I have a Gain on sale that is the exact same as sales price I listed on the Sales Price page. Does this seem right? I bought the vehicle at the end of the lease in April 2022 and then traded it in November 2022 so the actual sales price and total cost were within 1k of each other. 

[AmeliesUncle]

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@epro wrote:

On the Sales Price page, I listed 25% of the sales price 

 None of this applies to me and so I am leaving these fields blank. Does that seem right? 

On the Calculate depreciation equivalent page, I entered the depreciation equivalent for the years I had in service. 

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It was 25% business from when you bought it in 2022 until you sold it?

Yes, that seems right. 

If I'm reading your comment correctly, that is probably your problem.   You only use the depreciation equivalent of the miles from when you bought it in 2022 until you sold it.

[epro]

I'm really stuck on the basis part of this conversation (can you tell its my first time doing this?), and it makes a significant impact on my tax liability. I purchased the vehicle for X in 2022. I used the standard mileage rate for deduction since 2019, and so I calculated the depreciation deduction based on the mileage rates for 2019-2022 and got Y. Is my basis X - Y? To get Y, I only used my business miles. I am currently leaving my basis as 0 because I have no clue what I'm doing here and the prompt that I read on the basis page didn't seem to apply to me. However, when I read about basis I feel like I should be doing X - Y. Or should I be doing 0.25X - Y since 25% of the vehicle was used for business? 

[AmeliesUncle]

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@epro wrote:

 I used the standard mileage rate for deduction since 2019, and so I calculated the depreciation deduction based on the mileage rates for 2019-2022 and got Y. 

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As I said above, that is your mistake.  ONLY use the depreciation equivalent of the miles since you bought it.

[epro]

I did finally make sense of your explanations. However, I think all of this ended up being a moot point. My truck is a personal asset and not property of our LLC. Do I even have to calculate any kind of loss/gain on this transaction in the first place? I spoke with some tax people outside of this thread, and they seem to believe that I would not record any kind of loss/gain on a personal asset that is using partially for business. 

[AmeliesUncle]

Yes, gain/loss is still calculated.