Basis for gain/loss (enter 100% of basis) / Basis for AMT gain/loss (enter 100% of basis)

[codewarrior_777]

The question I have in is the TurboTax Home and Business desktop software regarding the gain or loss basis on a vehicle that I sold in 2023. 

I'm just not sure that I understand the question correctly. 

This question is asked after I've already input the total cost of the vehicle when I purchased it new minus the trade in. 

The question says:

Let's get info on your gain or loss basis

If you got this vehicle by trading in listed property that you used less than 100% of the time for business, enter your gain or loss basis. 

 Basis for gain/loss (enter 100% of basis) - ??

Basis for AMT gain/loss (enter 100% of basis) - ??

The vehicle cost was $14,571 (after deducting the trade in). 

I sold the car for $13,400. 

I'm not sure how to calculate this. My guess is that it was a loss.

What are the values that I should put in the boxes?

[KrisD15]

Did you use the vehicle 100% for business?

If not, the program may not be able to calculate the gain or loss. 

Your basis for the newer vehicle will be the basis of the trade-in plus cash you paid.

"If you got this vehicle by trading in listed property that you used less than 100% of the time for business, enter your gain or loss basis."

Since you traded in a vehicle that was not used 100% business, enter the trade-in value you received in relation to the percentage used for business. You also need to adjust for depreciation. 

SO, if the older vehicle was 20,000 new, you took 8,000 depreciation and used it 80%, the basis for that older vehicle would be 9,600. (20,000 - 8,000 =12,000 12,000 x .80 = 9,600)

If you paid 14,571 with the trade in for the new vehicle, the basis for the newer vehicle would be 24,171. (9,600 + 14,571).

It doesn't matter if the new vehicle had a sticker price of 50,000 and you got 35,429 for the trade-in, the basis for the trade-in is not what you received as a trade-in value. 

Remember that you "deferred" the depreciation on the old vehicle by putting it on the newer vehicle, so you may end up with a Capital Gain or Depreciation Recapture because of the sale of the newer vehicle. 

Basis for AMT would be the same as regular basis unless you were subject to AMT any tax year and your depreciation deduction was limited for that tax year, (you should know if that ever happened) 

For assets that depreciate, such as a business vehicle, the adjusted basis is the original basis less depreciation.

Lets say you purchase a truck for 30,000 and depreciate 20,000 over the years, so when you sell it has an adjusted basis of 10,000.

If you sell for over 10,000 but less than 30,000, it is depreciation recapture which is Ordinary Income.

If it becomes a classic and you sell for 35,000, you would have 20,000 depreciation recapture and 5,000 Capital Gain. 

[Mike9241]

when did you acquire the vehicle that is now being sold? if it was after 12/31/2017 you did things incorrectly. effective for 2018 and later years like-kind exchanges no longer applied to assets like vehicles.  Thus when you traded in the old vehicle the trade in value was supposed to be used for determining gain or loss on it. For the vehicle you sold in 2023, you should have used its cost for depreciation purposes. 

[codewarrior_777]

Thank you very much for your answer. The calculations make a lot of sense, but I should probably have a professional do it for peace of mind.

To be clear the total cost (sticker price + fees + taxes) of the car was $18,819 back in 2018. I had a trade in that was $4,248. So the total cost of the car was $14,571. 

So according to your formula of taking a 40% depreciation:

14,571 - 5,828 = 8,743  8,743 x .80 = 6,994

Does that look correct?

I do have all the receipts for my vehicles, so that isn't a problem for me to get the numbers. 

In all honesty, I don't know if I deferred the depreciation or not because I had a tax preparer do my taxes for 2019 (I bought the car in June 2018), but I do still have the returns.

Maybe I should use the TurboTax Live service or a tax preparer to look over my taxes? Do you recommend the TurboTax Live service?

[codewarrior_777]

I bought the car in June 2018 and sold October 2023. 

In all honesty, I don't know how the vehicle was dealt with on my 2019 tax return, but I did have a tax preparer do it and I still have the returns. 

I also usually just do the standard deduction, so I believe that is why TurboTax is asking this question because it assumes that I didn't do the depreciation. 

Either way, I just want to make sure I'm doing my return correctly.