I'm an independent trucker and leased my truck in October 2019. I put $14,000 down and have made 33 monthly payments with 17 payments remaining in the term. I'm transferring the lease to someone who will pay me more than the remaining balance of the lease. How do I calculate the basis and gain, and how do I report this to the IRS? IRS Form 4797 applies specifically to real estate and depreciable assets, but as my lease is an 'Operating Lease', I deducted the payments like a rental and did not depreciate the truck, so I'm not sure how and where to report this.
I'm not sure you really have an operating lease from a tax standpoint.
For tax purposes, for a lease to be considered a capital lease sometimes referred to as a financing lease (you're treated as owing the asset and can therefore depreciate it) it must meet any of the following criteria:
- At the end of the lease, ownership of the leased property transfers from the lessor to the lessee.
- At the conclusion of the lease there exist an option to buy the leased property below the fair market value at the date of termination (the option to purchase the leased property at its fair market value does not constitute a capital lease for this criteria)
- The term of the lease is in excess of 75 percent of the useful life of the leased property
- The net present value of future lease payments exceeds 90% of the fair market value of the leased property at commencement.
a legal question arises regardless of the type of lease. does the agreement allow you to sublet? depending on the wording of the lease you could have exposure to other liabilities.
assuming you have an operating and can sublet since you apparently are not in the business of subletting the lease payments you receive would be misc income not subject to self-employment tax and you could deduct the remaining payments you make under the lease.. note that the payments you receive would be taxable in the year received while the payments you make would only be deductible in the year paid
if you meet any of the criteria above then see a tax pro.