Trading in a car headaches!

[bpogatshnik]

I've read many help posts about vehicles being traded in that are used solely of business purposes, but several TurboTax pages are confusing me since we used our trade-in about 20% of the time for business purposes.

So...scenario with hypothetical names/numbers so my brain doesn't explode.

Bought a truck (henceforth named Bob) in 2014 for $20,000

Used for business 20% of the time.

I have kept track of business mileage for Bob since we bought him.

We have always taken the standard mileage deduction.

Traded Bob in for new truck (henceforth named Steve) in 2022.

Steve cost $30,000

Dealer gave us $1500 for Bob.

Steve now costs $28,500

Steve will be used for business 20% of the time.

On TurboTax, after reporting that Bob was no longer in use, entering the estimated mileage, and confirming we again wanted to take the standard mileage deduction, the next few pages defied logical reasoning. Please help. 🙂

Questions...

On the TurboTax page that says Sales Price.

1. I assume that the sales price would not be Bob's trade in value of $1500, but the business portion, (20% of $1500 or $300). Correct?

2. Since Bob was a trade in, and we didn't buy any yard signs advertising Bob, I assume our expense of sale would be $0. Correct?

On the TurboTax page that says Vehicle Cost.

3. Would this be the price of Bob when we bought him ($20,000) or the business percentage (20% of $20,000 = $4000) or the current, fair, Blue Book value of Bob today?

On the TurboTax page that says gain or loss basis.

4. Basis for gain/loss, basis for AMT gain/loss... I got nothing. Bob's original purchase price + "any major improvements" (nothing major) and minus "any depreciation that was allowed or allowable". Like, mileage? Isn't that on the next page?

On the TurboTax page that says Calculate Depreciation Equivalent

5. Is this where we do some crazy math? 2021 Bob business mileage was 1000 x $.26 and 2020 Bob business mileage was 1000 x $.27, etc.?  If so, let's say all the mileage x cents added up equals 2000. Would this be the prior depreciation equivalent? Would it be Bob's purchase price of $20,000 minus the 2000? Would it be the "business percent" of Bob's purchase price (20% of $20,000 = $4000 then subtract the 2000? How does the AMT depreciation equivalent differ?

Okay, that last one was actually several questions, but from what I've been reading, it seems like this section is giving a lot of people grief. Thanks for listening about Bob and Steve. We look forward to hearing from you. 🙂 

[Mike9241]

i seen two approaches. in any case your tax basis for steve is $30,000. the trade in you got is ignored

1)  depreciation deduction based on standard mileage tables from 2014 through 2022 so if that's $4K your tax basis is $16K ($20k - 4K)  sold for $1.5k loss  $14.5K 80% personal so not deductible. deductible loss on 20% = $2900

2) business portion of cost $4K (20%)  depreciation $4K tax basis = zero business portion sold 20% of $1500 = $300 gain 1245 recapture.

2) is how turbotax would handle it. $20K cost 20% business use  4K depreciable basis reported on 4797 $4K depreciation taken. manually enter depreciation taken using standard mileage method and 20% of sales price gain will appear on schedule 1 line 4

[bpogatshnik]

Thanks for the reply. We're getting there. Let's see if we have this straight.

1) Sales Price (business portion only) = $300 (which is 20% of the $1500 trade in value)

Expense of Sale = $0

2) Vehicle Total Cost = ???

1. $20,000
2. 20% of $20,000
3. other

3) Basis for gain/loss = $2900 which is 20% of ($20,000 – $4000 mileage – $1500 trade)

Basis for AMT gain/loss = same or different???

4) Prior depreciation equivalent = $4000 milage???

AMT Prior depreciation equivalent = same or different???

Sorry, if these seem like silly questions, this is the only thing that has really stumped us over many years of using TurboTax.

Thanks again in advance! 😊