Using a car since ’17 for biz + personal. In ‘22, I began using it for 3 businesses. How do I determine sale price, total cost, gain/loss basis, & deprecation (std mile)?

I purchased a Honda in 2017 for $26,983 and immediately started using it for business X and for personal use, and took the standard mileage deduction every year through '21.

In 2022 I used the Honda for business X until May 23, then began using it for new business Y and for personal use. As well, I started using it for new business Z and for personal use on June 23.

On October 3 the Honda was totaled, and insurance paid $22,291 for the totaled vehicle. Using that money, I purchased a new Mazda for $33,244. My out of pocket cost was $10,953. The car was immediately used for business Y and business Z as well as personal use just as before.

Here was my Honda business usage in 2022:
?Jan 1-May 23: Business X. 1924 miles.
?May 23-Oct 3: Business Y. 103 miles.
?June 23-Oct 3: Business Z. 1638 miles.
?Jan 1-Oct 3: 6470 total miles driven (business+personal)

For each of the 3 business, TurboTax Self-Employed asks me the following:
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1) What is the sale price of the Honda?
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?For biz X, should this be the insurance payment of $22,291 * percent biz usage for biz X?
?For biz Y, should this be the insurance payment of $22,291 * percent biz usage for biz Y?
?For biz Z, should this be the insurance payment of $22,291 * percent biz usage for biz Z?
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2) What is the Honda's total cost?
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?For biz X, should this be the $26,983 original purchase price - calculated biz depreciation from when it started being used for biz X on Jan 1 or previous years?
?For biz Y, should this be the $26,983 original purchase price - calculated biz depreciation from when it started being used for biz Y on May 23?
?For biz Z, should this be the $26,983 original purchase price - calculated biz depreciation from when it started being used for biz Z on June 23?
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3) What is your gain/loss basis for the Honda?
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?Since I did not make any improvements to the car, is this the same as the original purchase price in 2017? $26,983?
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4) What is the depreciation equivalent of your standard mileage deduction prior to 2022 for the Honda?
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Should I calculate this using the IRS standard mileage rate of depreciation allowed as follows?
?2017: 2534 miles * 0.25 = $634
?2018: 5691 miles * 0.25 = $1423
?2019: 3852 miles * 0.26 = $1002
?2020: 350 miles * 0.27 = $95
?2021: 5171 miles * 0.26 = $1344
?Total = $4497

552

Expert Alumni

Apr 9, 2023 7:24:35 AM

I'll answer your questions by your numbers -

Yes, your calculations here are correct.
Total cost is asking for the purchase price or FMV when you started using it for business. This is not the calculation for adjusted basis, so for biz X and Y, you will need to determine the FMV of the car at the time you started using it for each. So, for biz X the calculation is $26,983 x biz X usage percentage in 2017 (as long as you started using the car for the business on day 1 or 2 of owning it). Biz Y's total cost will be FMV on 5/23 x biz Y usage percentage for 2022 and Biz Z's total costs will be FMV on 6/23 x biz Z usage percentage for 2022.
If you did not trade in a vehicle you used for business before when you bought the Honda, your basis is the purchase price. If you did trade in a vehicle that you used for business before, you need to use the adjusted basis of the trade-in as your gain/loss basis. To calculate your gain/loss basis on a trade-in transaction take the original purchase price of the traded-in vehicle x biz usage percentage, add any improvements (like a new engine) at the biz usage percentage, and subtract the allowable depreciation taken on your previous tax returns.
Yes, your calculations are correct.

New Member

Apr 9, 2023 10:30:19 AM

Many thanks @AliciaP1 ! The answers are very much appreciated.

Is there a recommended way to determine the FMV of the car at a certain point of time in the past?

Expert Alumni

Apr 9, 2023 11:14:15 AM

There's no specific way but it needs to be supportable with reasonable information in case the IRS makes an inquiry about the transaction.

@metalpatton

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Using a car since ’17 for biz + personal. In ‘22, I began using it for 3 businesses. How do I determine sale price, total cost, gain/loss basis, & deprecation (std mile)?