Solved

I sold a car used in rental property, please explain tax implications, and how I enter the sale in Trutbotax Online.

Forum|Forum|2 years ago
February 23, 2024
1 reply
0 views

I bought the car in 2010 for $2500.

I sold it March 29, 2023 for $400. (junkyard sale).

I have $1600 in depreciation 2010 to 2023 (based on depreciation portion of standard mileage deduction).

I used the vehicle about 20% for my rental property (on average). So, 80% of usage (on average) is personal use.

Is my 'cost basis' 20% of $2500? (ie: $500 ?)

Is my 'sale price basis' 20% of 400? (ie: $100 ?)

Do I subtract my cost basis from (selling price + depreciation) to arrive at gain or loss? (500 - (100 + 1600) ) ?

Do I have a income gain, or loss, for tax reporting? (Is it -$1200 loss, or gain?)

I think if i understand WHY I am doing all these calculations, it would help me understand the TT forms. Thanks!

2 seconds ago

TurboTax Deluxe Online

Best answer by AmyC

Putting it all together, your car has a basis of zero and sold for $100. You have a $100 gain. Here is how:

Purchase: Business part of car would be 20% of original cost =$500

Depreciation: $500

depreciation taken for business use $1600 = business use depreciation using standard mileage is limited to zero and does not go negative per IRS Publication 463 (Page 35) Car Expenses:

You must reduce your basis in your car (but not below zero) by the amount of this depreciation. If your basis is reduced to zero (but not below zero) through the use of the standard mileage rate, and you continue to use your car for business, no adjustment (reduction) to the standard mileage rate is necessary. Use the full standard mileage rate (65.5 cents ($0.655) per mile from January 1–December 31 for 2023) for business miles driven.

Sale: sold car for $400 times 20% is $100 sales price

AmyCAnswer

Putting it all together, your car has a basis of zero and sold for $100. You have a $100 gain. Here is how:

Purchase: Business part of car would be 20% of original cost =$500

Depreciation: $500

depreciation taken for business use $1600 = business use depreciation using standard mileage is limited to zero and does not go negative per IRS Publication 463 (Page 35) Car Expenses:

You must reduce your basis in your car (but not below zero) by the amount of this depreciation. If your basis is reduced to zero (but not below zero) through the use of the standard mileage rate, and you continue to use your car for business, no adjustment (reduction) to the standard mileage rate is necessary. Use the full standard mileage rate (65.5 cents ($0.655) per mile from January 1–December 31 for 2023) for business miles driven.

Sale: sold car for $400 times 20% is $100 sales price

**Say "Thanks" by clicking the thumb icon in a post**Mark the post that answers your question by clicking on "Mark as Best Answer"

M

mnalepAuthor

AmyC

OK, thanks for your reply (twice 🙂 )

Now, how do I use Turbotax (I am using online version) to enter all this information correctly?

I was trying to complete this in the VEHICLE section. (under rental income section IIRC). Is that the correct place? (The images I posted is the FORM 4797 generated by my entries in the vehicle section

(anyways, in the turbotax section on vehicle used in rental, I somehow managed to get TT to generate this FORM 4797, which is close to what you described - a $100 gain - but where did the $10 come from on line 21?)

Someone else said use another section of turbotax?

Can you stick with me through this please? I've been talking to several people, and working all week on this one issue. I'd like to complete this last thing tdao and file my taxes!

A

AmeliesUncle

Well, two things, first I did not see any place to indicate whether the business percentage varied, or, that it was constant. Secondly, I filed the return last Saturday. But, I appreciate your input.