FMV

[dteddy19]

I gifted a car to my son in 2015. The car was a 2010 Toyota. At the time, the car was used by my grandson who was going to college. After the COVID outbreak, my son lost his job. About three months later he began a delivery service for groceries and food. When my grandson returned from college my son began to use the car for his delivery service. Since he never anticipated losing his job, he didnt determine the FMV at the time of the gift. He has since sold the car. 

Questions:

Since the car was used in his business starting in 2021. Is his FMV based on the gift received in 2015 or the conversion to business use in 2021?

Since no FMV was determined either in 2015 or 2021, how can the correct FMV be determined now?

[Opus 17]

First, his cost basis is the price you originally paid.

FMV is only important if he placed the vehicle in service for his business in 2021 using the actual expense method.  In that case, the basis for depreciation was the FMV at the time it was placed in service, or the cost basis, whichever was lower.  But, assuming he used the standard mileage method, he did not need to know the FMV.

When the vehicle was disposed of, he would owe capital gains tax if the selling price was more than the adjusted cost basis.  The adjusted cost basis would have been your cost (in 2010) minus any depreciation he took either as a specific expense, or rolled into the standard mileage amount (generally, between 25 and 30 cents per mile of the standard mileage rate is a depreciation allowance.)

I believe Turbotax should include this calculation, it should ask for his basis and his depreciation or mileage.  His basis is your purchase price from 2010, not the FMV on the date of the gift.  

[VolvoGirl]

The value of a gift is what your value was.  Or your cost.  There isn't a step up or step down in value.  

[dteddy19]

Thank you for your response. What do I do, if I no longer have the paper work showing my original cost?

[dteddy19]

Thank you for your response. What can I do if I no longer have the paperwork showing my original cost for the car?

[Mike9241]

@dteddy19  there are specific tax rules that deal with the sale of gifted property. assuming that in 2015 the FMV of the vehicle was less than your tax basis, here are the rules for figuring gain/loss on sale

For Gain: The Son's adjusted basis is the donor's(father's)  adjusted basis just before the gift, adjusted for any required basis changes during the son's ownership (depreciation)
For Loss: Your son's adjusted basis is the FMV of the property at the time of the gift, adjusted for any required basis changes during his ownership (depreciation). Note that if you use the donor’s adjusted basis for gain and get a loss, then use the FMV for loss and get a gain, you end up with neither a gain nor loss on the sale or disposition of the property.