Sale of a car used for personal and business use

[fkhalilz]

Can someone please tell me how to calculate the values that go into the 2 boxes below? This is for sale of my car that was used for both business and personal use for a few years.

I have done the following calculations. Are these correct?

1. Business use percentage: Total business mile driven over years divided by total miles driven since the car was used for business.

2. Business portion of sales price: Sale proceed multiplied by business use percentage calculated above.

3.  Business portion of sales expense: (Fair market value at the time car was placed for business use minus sales proceeds) multiplied by business use percentage.

Thank you!

[Cynthiad66]

Yes ! and 2 are exactly correct above, however, normally you would not have expenses of sale of a vehicle.  If you traded a vehicle and the agreed trade was reduced for some reason, that would be the expenses of sale.

The Fair market value at the time car was placed for business use minus sales proceeds) multiplied by business use percentage is not an expense of sale.  Most likely the expense of sale is $0.

@fkhalilz

[fkhalilz]

@Cynthiad66 

Thank you @Cynthiad66 for your response. There is a typo in the response. Are you saying #1 is correct, but #2 should be zero? Please confirm.

Just for clarification, I did not trade in my car. I simply sold it. In 2015 I started using this car for business use also. I estimated what it would have been worth (fair market value - or FMV) in 2015. Then I subtracted the 2021 sale proceeds from this FMV and multiplied the results by the business use percentage. If this is not how to calculated box #2, please let me know how to do it.

Thank you very much!

[ZoltanB45]

Number 1 on your answer was correct in how to get the business use percentage. Number 2 is correct also. 

The expense of sale is not referring to the value of the vehicle or cost of good sold. It is referring to costs such as advertisements to sell the car. 

[fkhalilz]

Thnk you @ZoltanB45  for tht clarification.

Based on your answer to item #3 (business portion of sales expense), if I only include the expense of sale such as advertising cost, then how would TT take into account the cost basis of the car? The business portion of my advertising cost is very small. So in effect most of the calculated business portion of sales proceed becomes a capital gain without any counter-balancing cost. I see this in form 4797. In other words, by not including the cost basis of the car, I will always end up with a capital gain.

Another point of clarification I should make here is that I have not taken any depreciation for this car over the years used for mixed use. None of the expenses of the car were written off either against my rental income. I only subtracted business driven miles over the years I used it for mixed use. that's all. I did not expect that sale of such a car with small business use would create a tax liability due to capital gains. Please advice.

Thank you!

[ZoltanB45]

You would have had to enter the vehicle information as an asset from the year you began using it for the business. I would create a new asset with the basis of what the vehicle should have been in the beginning of this year and then record the sale of that asset.  In order to do this, You would need to know the basis when you began using it, then deduct mileage depreciation from there. Here is a link illustrating the amount of depreciation taken for each mile driven.  https://www.irs.gov/pub/irs-drop/n-21-02.pdf