I bought a new car in 2012, began using it partially for business in 2017, and gave it away for $0 in 2020. During the tax years when I used it for business, I deducted the standard mileage rate on Schedule C.
In my 2020 form, I checked the box to indicate I stopped using the car -- and I am asked to complete a series of forms regarding the sales price, gain/loss, and depreciation costs.
There was no sales price. I gave it to the dealership, the dealership sold my mother a new car, and she gifted me a used car. Should I enter any of that in the 2020 forms? If so, where and how?
When I calculated the depreciation for four years of business miles, TT said I owed nearly $4,000 in taxes. That doesn't seem right. Is it right, or am I doing something I don't need to do?
Because if you took more depreciation than was allowable during the time you used the car for business, you would be required to recapture that amount and pay tax on it. Only a portion of the standard mileage rate is for depreciation - so when you calculate the depreciation you took using the standard mileage rate, you include these amounts.
If you sell or give away business assets during the year, the deal may generate a taxable gain or a deductible loss. There also may be tax consequences if business property is exchanged, destroyed, stolen, abandoned or condemned during the year.
If you're selling or exchanging property, your gain or loss is figured by calculating the difference between the amount you receive for the asset and its adjusted basis. The adjusted basis of the property is its original cost, minus any depreciation and expensing deduction claimed.
Generally, assets you own that are for personal use or held for investment are capital assets, and disposing of them generates capital gains or losses. But most of the assets you use in the normal course of business, including land and depreciable property, are treated as noncapital assets. They are called "Section 1231 property," after the section of the tax code that gives them favorable tax treatment, as explained here.
**Mark the post that answers your question by clicking on "Mark as Best Answer"
Thanks, I think I understand that.
I went back into the interview questions for the car -- and I entered the original purchase price into the box for "basis for gain or loss" and then I entered the four years of business miles multiplied by the depreciation rate into the box for "depreciation equivalent."
Does this sound right? Or did I get confused?