Sale of Business Vehicle - Form 4797

[SRBt360]

I'm having some problems with a business vehicle that I stopped using (and sold) in 2021.  I acquired the vehicle in 2008.  I used it 90% for business from 2008 to the disposition date April 1, 2021.  Took a special depreciation allowance in year 1 and depreciated it straight line over 5 years.  Everything I enter for this vehicle is looking to the deposition date - April 1, 2021 - and calculating a business usage of 30% for the year.  On Form 4797, part III, line 21 is 30% of the purchase price of the vehicle, line 22 is the total of regular depreciation taken over the life of the vehicle, line 23 is the difference (a negative number) which is then added to the sale price to calculate a taxable gain that is more than the sale price!  There isn't any depreciation recapture so why is my gain larger than the sale price?

[DianeW777]

I am going to recommend the following steps for entering your vehicle expense for this year and then the sale outside of the vehicle asset.

In the Vehicle Section:

Select it was sold/disposed of and then enter the date.  Take down all of the prior depreciation for each (assuming the vehicle is listed twice for two different businesses). Indicate that it was not sold, simply removed from service.

1. Add the percentage of business use for each year together for the life of the asset (from first year and every year you used it for business before selling it). Or take down all business miles for all years. 
2. Take the total business miles divided by the total miles to determine the actual business use percentage.
3. Multiply that percentage by the original full cost of the vehicle. This is the business portion of the original cost basis for the vehicle. 
4. Write down the total depreciation expense for all years, including 2021. This is the total depreciation used on the vehicle. 
5. Now you are ready to enter the sale of the vehicle under Sale of Business Property (not the business activity).

To record the sale of a business asset (vehicle) outside of the business/asset entry.

1. Under Wages & Income >Other Business Situations > Sale of Business Property >Start or Revisit > Enter your sale
2. See the images below for assistance.

Please update the issue if you need further clarification.

[SRBt360]

Sorry, but changing the miles does not correct the problems with Form 4797 Gain calculation.  The problem is that the date that I discontinued using the vehicle in 2021 is what is causing the errors on Form 4797.  Specifically, on the Car and Truck Expenses Worksheet for this vehicle, the date that I discontinued using this vehicle in my business, April 1, 2021 (line 43 of the worksheet), is used by TurboTax to calculate the percent business use of the vehicle (line 9 of the worksheet).  Even though I bought this vehicle new and started using it in 2008, and the vehicle has been fully depreciated for years (no depreciation recapture), TurboTax calculates that the percent business use of the vehicle over it's entire life is 30% (because of the April 1, 2021 date that I discontinued using it for the business) and enters 30% of the original purchase price on line 21 of Form 4797 - the cost or basis of the vehicle for calculating the gain on sale.  The percent business use field on the worksheet is not changeable except by manipulating the date that I stopped using the vehicle in the business.  Note also that the date that I discontinued using the vehicle is entered on Form 4797 also (Part III, line 19a, column C).

The percent business use on the Car ad Truck Expenses Worksheet is being calculated (incorrectly in my case) and should be an open field so that I can enter the correct percent business use over the entire life of the asset.

(The incorrect percent business use calculation also causes problems with entering actual expenses for the vehicle.  In my case, only 30% of the vehicle's actual 2021 expenses are treated as deductible expenses.  All of the expenses that I incurred to April 1, 2021 should be deductible.)

[DianeW777]

It sounds like you are trying to enter the sale through the vehicle section.  It is best if you figure out the necessary information as detailed in the previous answer, then enter the sale yourself as indicated under Sale of Business Property.  This will allow you to enter the correct figures for the sale manually for the desired outcome, separately.

[Walter1947]

Doing this now in the 2022 product.

So should I NOT mark in the vehicle section this was sold? I am confused. It seems to want to call a gain almost the entire original purchase, when in fact what was paid on trade less basis is much, much less. I know basis, I know what the dealer gave on trade, so this seems like it shouldn't be so hard.

[PatriciaV]

As DianeW777 said, the sale of a business vehicle is more easily reported under Sale of Business Property than under the vehicle section of your Business Expenses. However, you should mark that you "stopped using this vehicle" on the vehicle info page under Car & Truck Expenses. Enter the date you stopped using it, then leave this section and go to Sale of Business Property under Wages & Income.

If you have already entered sale information under Business Expenses, go through the screens again for this vehicle in Car & Truck expenses and delete all your entries about the sale. Continue to the end to save your work. Now go back and check the box for "stopped using this vehicle."

Reporting this transaction as the Sale of Business Property gives you more flexibility and control over how the gain/loss is calculated, based on your own records.