2017 auto replaced with 2019 under lemon law

[ratherbe1]

We turned in our 2017 model in October for a 2019. In Turbotax Home Bus. 2019, I updated the auto info to reflect the new mileage from the 2017 we used for the last two years (I listed mileage used for the 2017 and also the 2019). It was a direct exchange, no costs incurred, and the original loan remains in place. Is that all I need to do? Is depreciation calculated for the 2019 now? I want to be sure what I did is acceptable. Thanks.

[RobertG]

You need to report the disposition of the 2017 vehicle and the acquisition of the new vehicle on your return.

As I understand it you are reporting the two vehicles as if they were one.  They need to be reported separately.

What has happened here is that you traded in your 2017 vehicle for a 2019 vehicle.  

You should indicate in TurboTax that you disposed of the 2017 vehicle in 2019.  The amount you received for the vehicle is the fair market value of the 2019 vehicle less the balance of the loan.

Then enter the 2019 vehicle separately.

[ratherbe1]

Thank you for the reply. I reported the 2017 sold/disposed on Oct 10, and the 2019 placed in service on Oct. 10. The loan balance at the exchange was ~$21,000

You stated, "The amount you received for the vehicle is the fair market value of the 2019 vehicle less the balance of the loan."

I didn't receive any amount, just car for car. How can I determine the fair market value of the 2019? If the 2019 was brand new, wouldn't it be the retail price?

[ColeenD3]

Yes, the FMV would be the same as the new car retail sales price.

[ratherbe1]

Entering FMV - loan balance into the Sales Price makes the entire amount taxable.  I don't see how that can be correct. I didn't make $23,000. It was an exchange.

[RobertG]

Your basis in the old vehicle is what you paid for it less the amounts you claimed for depreciation.

The sale price is the fair market value of the 2019 vehicle less the balance of the loan.

Your basis less the sale price is the amount of your gain.

Starting in 2018, you can no longer defer the gain on the exchange of business vehicles.

[ratherbe1]

Thank you Robert for helping me there. I have the figures from your statements, but I don't know where to enter them.

Per your 1st statement, is the Sales price of the 2017 also the Basis? Is there depreciation in 2019 I need to add in, since it was used until October?

In TT for the 2017:

Sales Price? (I entered the calc of your 1st statement)

Expense of Sale $0

Basis for gain/loss?  (again I entered the calc of your 1st statement)

Basis for AMT (TT enters the gain above)

TT states the gain on sale is the sales price, and TT adds the entire amount as Fed Tax Due.

Once I enter the 2017 correctly, I will move to the 2019.

Thank you again.

[ratherbe1]

For the 2017, when I entered the sales price (fair market value of 2019 - loan balance=$19,000) and Basis (old vehicle cost - depreciation=$20,500) TT states the entire sales price as Gain and the entire sales price is now due as Fed tax.

Basis - Sales Price should be $1,500, which should be the Gain.

What is wrong?

[RobertG]

I would suggest that you schedule a callback with a TurboTax expert to get this resolved.  

The expert will be able to see your TurboTax screens to guide you screen-by-screen and offer advice.

To schedule a call, click on 'Help' in the top of your screen on the right.

Then select 'Contact us'

Then 'Talk to a person'

[ratherbe1]

I can't enter anything in "Talk to a person" that will initiate a call with a person. It keeps asking questions and then states I must select a product and start a return. I've done both but there isn't anywhere to prove that in the menus available.

[ratherbe1]

This is the response:

Sorry, but I can't get you in touch with the right person to help you with this until you finish selecting a TurboTax product and begin working on your return :(

There is no place to "select a TT product" and my return is on my computer.