If you trade-in a vehicle and the bank pays off the loan (was upside down) is that counted as profit from the trade-in?

[skinnynic]

Trying to figure out if I claim profit or mark as no profit since the payoff went straight to the bank and I owed more than the pay-off. Any ideas.?

[tagteam]

Is this a vehicle that was used for business?

You need to compute your adjusted basis (cost of the vehicles less accumulated depreciation) and then subtract that figure from what you received for the vehicle when you traded it in.

[skinnynic]

Yes, it was used for business. where do I find the depreciation part?

[tagteam]

Did you use actual expenses or the standard mileage rate?

[skinnynic]

I think standard. I'm filing late...

[skinnynic]

additionally, now under Sale of Business Property it is showing the cost I paid for the car, plus the amount the bank was paid for the pay-off during the trade like I profited the cost I paid. I'm so confused.  

[Carl]

If you used the per-mile method, then you need to recapture the depreciation taken for business miles claimed each year. Hopefully, you kept records. You'll need the depreciation per mile for each tax year, since that changes each year. The table you need for depreciation per mile is just over halfway down the page at https://bradfordtaxinstitute.com/free_resources/irs-mileage-rates.xml.aspx

 I seriously doubt you sold or traded in the vehicle at a gain. Even with recaptured depreciation I'd expect you to still have a loss, and a pretty big one most likely. But of course, the oxymoronic rule set may apply here too.

[tagteam]

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@skinnynic wrote:

....plus the amount the bank was paid for the pay-off during the trade....

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You need to look at your paperwork from the transaction to determine the exact price the dealership allowed for your trade (i.e., old vehicle) as that would be your sales price.

[AmeliesUncle]

This isn't actually your question, but unless your vehicle was always 100% business use, TurboTax is NOT set to to assist you to report it, and requires some manual calculations.

And if the vehicle was originally 100% personal then later converted to business use (either partial business or full business), then TurboTax is REALLY, REALLY NOT set up to assist you with properly reporting the sale.

You may consider a tax professional for this year.