K1 Vehicle Prior Depreciation—Converting to Income on Trade-in?

I have a vehicle that was put into service for my business in 2004 and was traded in for a new business vehicle in 2019.

 

I'm having a hard time with TurboTax and am wondering if this trade-in should be recorded as a sale or as a conversion.

 

When I enter it as a sale as part of my K1 (a sale for under 1K) it increases my income over 12K as a sale of business property. The trade-in value was just over 1K and business percentage ~50%.

 

When I enter it as converting to non-business use, there is no income increase, obviously, and this has a large effect on my taxes.

 

Should the prior depreciation of the vehicle (it was probably fully depreciated over the course of all of these years) be counted as income when I trade it in? At a loss and this doesn't make sense to me.

Business & farm

It is reported as a sale.

 

Yes, if it is fully depreciated, you will have a taxable gain.  "Fully depreciated" means that for tax purposes, your 'purchase price' (Basis) is $0.  So the full amount of the sale is a gain.

Business & farm

Thanks for the response. I've spend so long on the phone with TurboTax today trying to sort out an issue that seems to be an inability of the software to deal with what should be accurate info—entering the original cost and depreciation over the years. It gives me a huge profit since the limited use this year before the sale brings my basis down to next to nothing.

 

I'm wondering if I can just change the cost and the prior depreciation to 0, leaving the only profit as the sale portion with no depreciation recapture. It feels very uncomfortable but there doesn't seem to be another way to get through this without errors that stop me from being able to file.

Business & farm

Just enter it as a conversion to personal use  and not a sale then you don't need to deal with this any longer. 

Business & farm

If the vehicle had personal use also, the program is not set up to report that and you can NOT report it in the vehicle section.  You would need to either manually do some calculations and enter it in the "Sale of Business Property" section, or go to a tax professional.