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mccarthy-peter-j
New Member

For 2017 converting personal vehicle to business, it asks for purchase and market price. Which is used as the starting value for Depreciation?

My purchase price is much lower than market value.  This is a cab and chassis truck that was converted to dump truck along with other repairs prior to being put into business use.  Example:  Purchase price $10K, upgrades $10K, Market value $25K.  I worry if depreciation starts from $10K then end up selling for $25K I will have a huge tax burden so I have been avoiding converting it to business use for depreciation.   Do I use $10K, $20K for purchase price?  And is IRS using market value of $25K or purchase price as starting point for depreciation. 

1 Reply
TaxGuyBill
Level 9

For 2017 converting personal vehicle to business, it asks for purchase and market price. Which is used as the starting value for Depreciation?

You use the lower of (1) the Basis (purchase price plus cost of improvements) and (2) the Fair Market Value at date of conversion to business for purposes of depreciation.

So in your example, you would use $20,000 (assuming it was $10,000 of improvements, not repairs).


Yes, if you sell it for more than your Basis ($20,000, minus depreciation you take for the business), the gain will be taxable.  Just like anything else, if you sell something for more than you paid, the profit is taxable.

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