I Gifted my car to my daughter and she used it partially for business, it was later totaled. How do I enter this in TurboTax?

[DM007]

I gifted my car to my daughter a few years ago, and in 2021 she used it partially for business. She drove for a total of 3000 miles (500 miles for business 16.67%) and received a business expense deduction of $280. In May of 2022, the car was in an accident and totaled; she received a check for $9,856 from her insurance company.

Under sales price, I entered 1,643 “business portion” ($9,856 times 16.67%). I left blank the boxes for  Vehicle cost and Basis for gain/loss. Now it shows that she has a gain of $1,643. Is that right? She took a $280 deduction last year and now has a gain of $1,643? In retrospect, would it have been better not to have partially used the car for business?

[ErnieS0]

No. It is not right to leave blank the boxes for vehicle cost and basis for gain/loss.

The cost of your daughter’s car is either the business percentage of your cost or fair market value of the car when you gave it to your daughter.

It depends on whether there was an overall gain or loss.

• Your adjusted basis for figuring a gain is the donor's adjusted basis just before the donor made the gift, increased or decreased by any required adjustments to basis while you held the property.
• Your adjusted basis for figuring a loss is the FMV of the property at the time the donor made the gift, increased or decreased by any required adjustments to basis while you held the property.
• Note: If you use the donor's adjusted basis for figuring a gain and get a loss, and then use the FMV for figuring a loss and get a gain, you have neither a gain nor loss on the sale or disposition of the property. 

See What is the basis of property received as a gift?