gain or loss basis

[debbie-sturzeneg]

This is first time this question for Gain or Loss has come up.. Plus other questions after that on this  like Gain on Sale, Prior depreciation etc.  dont know how to do this. have only been doing this independent work since 2022.

I am independent contractor. I use my vehicle for work and personal.  I traded in my suv i used all year on a newer model on 11-30-23.  The vehicle was not paid off .  They allowed X amt of dollars trade in value towards the purchase of the new suv and the excess of the loan was added to the new loan .   

[RobertB4444]

Since you added your vehicle to your taxes for depreciation in 2022 when you sell it the portion of the sale that is a gain can become partially taxable.  You will enter the transaction as a sale and the sale price on the car is the amount of trade in value that you received.  Then you can enter the new vehicle in the same way that you entered the car last year and begin depreciating that car.

@debbie-sturzeneg 

[debbie-sturzeneg]

there are 2 lines to complete . it says Basis for gain/loss(enter 100%of basis) ____

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

GAin on Sale thats all you need to enter regarding saleof this vehicle

Prior depreciation of standard mileage deduction for all years including 2023

Depreciation Equivalent _____    AMT Depreciation Equivlent_____

Sales Price       

This just goes on and on

[RobertB4444]

Basis is just how much you paid for the car.

Depreciation is just the depreciation deduction from your 2022 return since that is the only year that you did this.

Sale price is the value of the trade in.

@debbie-sturzeneg 

[debbie-sturzeneg]

Which car? the on i have now or the one i got rid of?

[debbie-sturzeneg]

also. I didnt gain on the sale I lost money they gave me a $14,000.00 trade in but that still left 3000.00 on the loan on the old car that they added on to the new car that totaled together  33145.00

[DianeW777]

You may or may not have a gain on the sale of the old SUV.  You must figure it out and it has nothing to do with what is owed on the balance of the loan.

First you should already have the SUV vehicle listed on your business schedule. You will enter all of the business miles and the total miles for the year. If you did not use the standard mileage rate in 2022, you cannot use it in 2023.  If you did use that in 2022, you can continue to use it in 2023. 

Add your new vehicle to the Business (Newer model purchased in November, 2023). Standard mileage rate must be used the first year or it can never be used on this vehicle.

1. The sales price is the trade in value received times the business use percentage (total business miles both years divided by the total miles on the vehicle for both 2022 and 2023).
2. Date acquired is your actual purchase date
3. Cost is what you paid for it times the business use percentage you calculated in number 1 above
4. Sale date is the trade in date

How to record the sale of the SUV:

The way to report the sale or trade-in, (trade is not recognized by the IRS any longer for equipment or vehicles) is as follows. You have all the records so it should provide you the detail to move forward.

1. All business miles for all years and then total miles for all years - divide business miles by total miles to arrive at your overall business use percentage for the life of the vehicle. You will use this percentage times the selling price (trade-in value) to arrive at the business selling price. 
2. Calculate the standard mileage rate depreciation portion for the business miles each year if that is the method you used for the expenses each year.  If not use the depreciation you actually deducted each year your vehicle was used for your business.
   •  A portion of the standard mileage rate is considered depreciation.
3. When go to the vehicle information under your business you can select 'Sold, disposed of, etc....' then do not indicate it was sold.  You must say 'Yes' it was converted to personal use.  This will eliminate any sales information in the vehicle itself.
4. Once you have completed the information in that section you will follow the steps below to enter your sale:
   1. Go to Other Business Situations
   2. Scroll to Sale of  Business Property
   3. On the next screen select Sales of business or rental property that you haven't already reported
   4. Use the information from step one and the depreciation from step 2 to complete your sale
5. If the personal portion of your vehicle is a loss there is nothing to report for that portion of the sale/trade.  

Once this is completed your sale will be recorded properly on your return. The image below is the correct selection for this sale.