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Level 5
June 22, 2024

sale of vehicle partially used for business

  • June 22, 2024
  • 2 replies
  • 37 views

Vehicle was purchased 8 years ago. In year 9 the car was partially (48%) used for business. Years 1-8 had no business use. Standard mileage rate was used in year 9. In October of year 9, the car was sold. A. Even though the car was used less than 1 year for business, do I still calculate the deprecation equivalent with standard mileage? 

B. Is the sale short term or long term for business part of the vehicle? It was owned 9 years but business use less than 1 year. There is a small gain when using purchase price and % of business miles from purchase date.

Thank you for your reply

JGCPA

 

    2 replies

    Level 15
    June 22, 2024

    Yes.

    Long term.

    BobKamman
    Level 15
    June 22, 2024

    What amount are you using for basis?  Original cost, or value at time of conversion to business use?

    jgcpaAuthor
    Level 5
    June 22, 2024

    To reply to Basis question- I calculated a gain with Basis starting point at Purchase cost. This starting point yielded a gain

     

    JGCPA

    BobKamman
    Level 15
    June 22, 2024

    I'm not sure how I would deal with one of those.  I'm lucky that all my business-use vehicle owners retired before they changed the rules on like-kind exchanges.  And then took away employee business expenses. 

    But let's say the car cost $25,000 eight years ago, and the value at trade-in was $12,000.  And for one year, it was driven 10,700 business miles, which I think comes out to about a $3,000 depreciation equivalent, and 50% business use.    If you subtract the $3,000 from the $25,000, you still have a basis of $22,000.  If you subtract the $3,000 just from the $12,500 basis for the business-use half, you still get a basis of $9,500, and that's more than the $6,000 proceeds for the business half.  

    Of course, the miles could be a lot higher and the business use percentage could be a lot higher.  Let's say 21,400 miles and 80% business use.  That $6,000 depreciation, subtracted from $20,000 basis for the business part.  Still a loss.  You're not subtracting the whole standard mileage rate amount, are you?  It should be just the depreciation part of it.