![]() ![]() If the Trade-in was 2,000, you have a 2,000 gain. If you paid 35,000 and depreciated fully 35,000 that leaves zero. So, whatever you paid less depreciation is subtracted from the sale price (in your case, the trade-in value) There was a time when business vehicles could be treated as Like-Kind exchanges, but that is only available for Real Estate now. Whatever the Dealer gave you as a Trade-in value is what you sold the vehicle for. If you owned the car as a business asset for 10 years, reason says you used all the available depreciation. There is also "Bonus Depreciation" allowing a larger amount to be taken the first year, and Section 179 which is a deduction which allows you to basically "Expense" part of the value. That would be your basis.ĭepreciation would be based on that value/basis.ĭepreciation can be computed several ways, such as "straight-line" which is equal amounts each year. Whether you paid 35,000 cash, took a loan, or traded in something of value (your old vehicle) or any combination still results in the car being worth 35,000 to you. If the price was 35,000 that was the value to you, so that would be your basis. Your original basis would be the purchase price. When you put a vehicle in service as a business asset, depreciation is taken based on the expected useful life of the asset. It no longer matters who you sold the car, person or is listed yearly on Form 4562 "Depreciation and Amortization". ![]() You could have instead sold your car to a person, then used that same cash to buy the new vehicle. The trade in value is the sale price of the old car. If the new vehicle cost $25,000 minus trade in, the basis is $25,000. This is why the IRS changed the rules to simplify the chain with vehicles. The new vehicle now stands on its own since the trade in value is being taxed.
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