Sale of a car used in business

[LM--2025]

I sold my car in 2024 and received a $9,000 Trade-in Allowance, which was applied to Lease Payments for a new leased car. The cost of my old car was $53,390.91, used on an average for the past five years of 37% in business.  The IRS Depreciation since 2014 (when I bought the car) is $17,540.82.  I calculated the adjusted basis as follow=:  $53,390.91 x .37=$19,952.18 (cost per Business Use) Less: Accumulated Depreciation of $17,540.82=$2,411.36.  I received $9,000 for the old car. I think I would report a gain of $951.94.   $9,000x.37=$3,3363.30 less Accumulated Depreciation of $2,411.36). Or, because I did not have 50% Business Use, I should report a gain of $9,000.  Help in determining what I should properly report would be appreciated.

LM--2025

[KrisD15]

Using your numbers, I get 919 as Depreciation Recapture

9,000 x .37 = 3,330

3,330 - 2,411 = 919

That all sounds good, my only question would be why the depreciation is only 17,541 if it was used five years, but perhaps it was not five full years and therefore not fully depreciated.

[LM--2025]

Thank you, Kris, for replying!

The rate I used is the depreciation portion of the standard mileage rate.  Also, the car's business use dropped quite a bit in the past three years.  The car was used for business for a total of 12 years.  The total miles were 70,184.   and the IRS depreciation I calculated is $17,541. (example Year 2020. Rate:  $.27 Business Miles  4,570 = $1.234).  Can you tell me what I may have done wrong here?

You are correct.  I multiplied a percentage rate of 37.37% to the trade-in allowance, rather than 37%. 

I've entered the figures into Turbo Tax. , which shows I have to report an ordinary income gain of $2,411 and a long term gain of $919 (Total $3,330.)  Does this sound right to you?

LM--25

[DianeW777]

Yes, you are right. The full amount of business use standard mileage rate (SMR) is used in your formula to arrive at taxable gain. Business use numbers below:

1. Cost: $19,952
2. Depreciation (SMR portion) $17,541
3. Sales Price: $3330
4. Gain = $919

Be sure to mark the vehicle as converted to personal use. 

Next enter your Sale of Business Property

1. Income at the top
2. Scroll down to Other Business Situations
3. Select Sale of Business Property
4. Select Sales of business or rental property that you haven't already reported.
5. Answer 'Yes' to Do all of the following apply...?
6. Enter your sales information, do not make an entry for depreciation (no zeros)
   1.  Description of the Property (Vehicle made/model/year)
   2. Sales Price/Sales Expenses 
   3. Date acquired and date sold
   4. Sales Price
   5. Cost
   6. Depreciation

@LM--2025 

[LM--2025]

Hi Diane

I made a mistake.  I asked a question and must have used the wrong Title or something.  And< I did not click on REPLY to your message.

My question was - following my previously mentioned information - why are two fields listed under FORM: Car & Truck's Worksheet: Line 51 Depreciation allowed 1,718, Line 52 AMT depreciation allowed highlighted in RED??

Also, everyone is telling me to be sure to say that the car was converted to personal use.  I simply cannot find where to do this in Turbo Tax.  Can you please give me the exact steps ?

Thank you,

LinDA