none of the above.
from IRS PUB 969 deprecition
Property changed from personal use. If you held property for personal use and later use it in your business or income-producing activity, your depreciable basis is the lesser of the following.
1. The fair market value (FMV) of the property on the date of the change in use.
2. Your original cost or other basis adjusted as follows.
a. Increased by the cost of any permanent improvements or additions and other costs that must be added to basis.
b. Decreased by any deductions you claimed for casualty and theft losses and other items (such as depreciation) that reduced your basis.
you paid cash of $20897
now we have to look at the trade-in to see what can be added to the basis of new vehicle.
the old vehicle's cost must be split into 2 parts. the personal portion and the business portion. generally, you would use personal mileage to total mileage to get the personal portion and business mileage to total mileage to get the business portion.
for the personal portion, the amount to add to the basis of the new vehicle is the lower of cost or fair market value on the date of trade-n multiplied y the personal percentage. this may not be in accord with what the dealer put on the invoice. research on the internet
say personal use is 40% and FMV at the date of trade-in for the whole (old) vehicle is $9000
40% of cost (.4 X 16733) is $6993. 40% of FMV is $3,600. since 40% of FMV is lower than 40% of cost the $3,600 would get added to the basis. (basically, the "depreciation" on the personal portion gets lost)
this is no different than what would happen if there had been 100% personal use and after two years you put it into use in your business. the IRS would only allow the FMV (if lower than cost ) as the depreciable basis for the business.
then we have the business portion 60% of $16733 is $9740 less depreciation taken is the business portion that gets added to basis.
