Sale of vehicle used partially for business (self-employed)

[user17605556538]

Hello,

I am trying to understand the inputs on Line 2, Part I, of form 4797.

I purchased a vehicle in Jan 2017 for $17,000.

I started using the vehicle in 2023 for business (self-employed) in addition to personal use.

I sold the vehicle in Aug 2025 for $8000.

Total miles driven since purchase 74,429 miles.

Total miles driven since I started using the vehicle for business 21,166.

Total miles driven for business 1558 miles (2023-2025).

When determining the business portion is it 1558/21166 = 0.07 = 7%  OR 1558/74429 = 0.02 = 2% ?

Then, the business portion of the gross sales price (2d) is either $560 (7% of $8000) OR $160 (2% of $8000)?

I can figure out the depreciation based on the depreciation portion of the std mileage rate that was used for tax purposes.

Then to determine cost or other basis (2f) is that $1190 (7% of $17,000) OR $340 (2% of $17,000)?

TYIA

[AmeliesUncle]

It is complicated.  You didn't say how much the depreciation was (from the Standard Mileage Rate) or what the Fair Market Value (FMV) of the vehicle was when it was converted to business use, so let's hypothetically say it was $450 of depreciation and a FMV of $10,000.

You start the calculations based on the purchase.  

• 1,558/74,429 = 2.1% (for this example, I'll keep using the rounded 2.1%)
• $17,000 x 2.1% = $357 (purchase price of business portion of vehicle)
• $357 minus $450 of depreciation ... but Basis can't be below zero, so Adjusted Basis is $0
• $8,000 x 2.1% = $168
• Adjusted Basis of $0 with a Sale Price of $168 = $168 of gain.
• It is a gain, so we can stop the calculation there (see next bullet point if it was a loss).  Use $357 Purchase Price, $357 of Depreciation, and a Sales Price of $168.
• If that calculation had ended in a loss, then we would redo the calculations using the information from 2023 (FMV, miles since converted to business, etc.).  But that doesn't apply to your scenario. 

[user17605556538]

@AmeliesUncle Thank you for the detailed reply. I honestly didn't think the FMV when the vehicle entered into business use was relevant from anything I've read online or in the instructions for Form 4797.

A bit more research leads me to believe I can include taxes and fees in the purchase price, plus any upgrades to the vehicle (after market remote starter)....thus my revised total cost or other basis is $19,093. 

To determine the business portion of the total cost /other basis (2f) and gross sales price (2d), more research also leads me to believe I should use the lifetime miles driven (from when I purchased the vehicle until traded in), and not just the total miles driven since the vehicle entered into business use (correct?). Thus, total miles driven 1/2017 thru 8/2025 = 110,715 - 36286 = 74429  Then, the business portion of miles drive = 1558/74429 = 2.1% (agrees with your determination).

Thus, the business portion of the sales price = 2.1% * 8000 = $168 (2d)

And, business portion of cost/other basis = 2.1% * 19063 = $400 (2f)

Depreciation from IRS tables = $466 (2e)

Gain or loss  (2g) =  (2d) + (2e) - (2f)  per Form 4797

Gain = 168 + 466 - 400 = $234

Sound correct?

[AmeliesUncle]

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@user17605556538 wrote:

I honestly didn't think the FMV when the vehicle entered into business use was relevant from anything I've read online or in the instructions for Form 4797.

A bit more research leads me to believe I can include taxes and fees in the purchase price, plus any upgrades to the vehicle (after market remote starter)....thus my revised total cost or other basis is $19,093. 

To determine the business portion of the total cost /other basis (2f) and gross sales price (2d), more research also leads me to believe I should use the lifetime miles driven (from when I purchased the vehicle until traded in), and not just the total miles driven since the vehicle entered into business use (correct?).

And, business portion of cost/other basis = 2.1% * 19063 = $400 (2f)

Depreciation from IRS tables = $466 (2e)

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You may want to re-read my original post.  Most of your questions have already been answered.

As I mentioned before, FMV would be used if the first calculation resulted in a loss.  But that doesn't apply to your specific circumstances.

Yes.

Yes, but only if the first calculation that I gave you (and what you are doing) results in a gain.  If it had resulted in a loss, you redo the calculations using the FMV and the miles since it was converted to a business.  But as I said, this doesn't apply to your specific circumstances.

Almost, but not quite.  As my original post indicated, Basis can't go below zero, so depreciation can't exceed the Basis.  Even though you added up $466 of depreciation, you only enter the amount UP TO the business Basis ($400).