Traded 100% business vehicle for personal vehicle

[bk2007]

I operate a business as a sole proprietor (schedule c) with 3 employees. I have three business vehicles (registered in busines name). I recently traded one of them for my own personal vehicle registered in my name.

I was allowed $17,000 for the trade in of the business vehicle towards my personal car. The business vehicle was purchased new in 2015 and was fully depreciated. As I completed the information and answered the questions in TurboTax, it would appear that the $17,000 is not taxable in any way. Is this correct?

[AmeliesUncle]

No, that is not correct.  That would be a taxable transaction.

Was the sold vehicle always used 100% for business since you owned it?  

[bk2007]

Yes, 100% until traded in for personal vehicle.

[AmeliesUncle]

Then because it was fully depreciated, it should be showing a $17,000 taxable gain.

You may need to go back through the vehicle section to review things.  Be sure to indicate that the vehicle was sold, and it should ask you the selling price.

[bk2007]

I thought that but it says that if I converted it to personal use or traded it in it to leave it as $0. 

[ColeenD3]

In terms of leaving it at zero as mentioned above, conversion to personal use does not create a taxable event. However, if you sold the personal car at a later date, the basis would be zero. In addition, you did not trade in a business vehicle for another business vehicle as assumed by the program. You traded it in for a personal vehicle.

[Rick19744]

I agree with @AmeliesUncle .

You have two transactions going on here.

• First you "sold" a business asset that was fully depreciated and received $17,000.  You just need to indicate in TT that the vehicle was sold.  This will generate a $17,000 gain on the form 4797.
• Second, you then used those proceeds to purchase another vehicle; a personal vehicle.
• These two transactions are separate.  There is no conversion of a business vehicle to personal vehicle.  The business vehicle is gone.

[Papavictor]

What if the vehicle wasn't traded or sold but no longer able to of service? A total loss?

[PatriciaV]

@Papavictor
Yes, if you can no longer use the vehicle for business, the remaining value of the vehicle will be claimed as a loss.

To report this in TurboTax, edit the vehicle and check the box for "I stopped using this vehicle in 2021" on the page titled "Tell us about your business vehicle." Enter the date you stopped using it. Later in the interview, you will see the "Sales price" page. Click the link "how to determine the sales price" for more help. Enter zero or leave the sales price blank to claim it as a loss.

[AmeliesUncle]

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@Papavictor wrote:

What if the vehicle wasn't traded or sold but no longer able to of service? 

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What exactly does that mean?

If it means the vehicle won't run and you can't find any buyers for it (not even a scrapyard), yes, that would be a total loss.

Otherwise, it probably won't be a loss until you actually "dispose" of the vehicle.

If you give details about exactly why the vehicle is "no longer able to be of service", we may be able to provide a clearer answer.

[AmeliesUncle]

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@PatriciaV wrote:

Yes, if you can no longer use the vehicle for business, the remaining value of the vehicle will be claimed as a loss.

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It may depend on the situation, but you usually can't claim a loss until the vehicle is actually disposed.

[Green H]

If I have a business, take actual vehicle expense deduction, business is closed after two year depreciation, Car was used for 80% + for business, now because business is closed, car is 100% personal use. How should I enter in TT

Also I have a business, take mileage deduction.  business is closed after two year depreciation, Car was used for 80% + for business, now because business is closed, car is 100% personal use. How should I enter in TT

Thanks 

[RobertB4444]

For this year you just need to indicate that the vehicle has been converted to personal use and save a copy of all of the depreciation that you have taken on the vehicle to date.

When you sell the vehicle you will need to enter all of the depreciation information into TurboTax and pay tax on any of the depreciation that you recapture in that sale. 

@Green H 

[AmeliesUncle]

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@Green H wrote:

If I have a business, take actual vehicle expense deduction, business is closed after two year depreciation, Car was used for 80% + for business, now because business is closed, car is 100% personal use. How should I enter in TT

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How was that vehicle depreciated?  Did you use any kind of accelerated depreciation, such as Bonus, Section 179 or 200%DB?

[Green H]

@AmeliesUncle  I didn't use any  Bonus, Section 179 or 200%DB