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How do you determine the adjusted basis of a new vehicle purchased with the old vehicle used as a trade in.?

Purchase price of new auto = $23,000

Trade in value  of old vehicle = $9,500

Purchase price of old vehicle (5 years ago) = $23,000

3 of the 5 years took standard mileage deduction; 2 of the 5 years took actual expense deduction (depreciation). Business mileage use % averaged around 20 - 25% each year.

How do you compute the basis of the new auto?

Also, is there any gain/loss to be recognized or is the gain/loss used to compute the adjusted basis of the new auto?

Where in the asset worksheet do you enter the values determined above?

    I have a few questions:

    What is the business entity type? Which tax form are you preparing? With business use being that small, who is listed as the owner on the title?
    • Business entity = sole proprietor.
      Tax form = 1040
      Business use owner is sole proprietor

      Since the old auto was traded in + cash  for the new vehicle, what entries are required at the bottom of the asset worksheet. For example, how is the "sales price" calculated using the info above?
      Is it correct the there should not be any 4797 gain since the old auto was traded in and the gain/loss is added/subtracted from the basis of the new auto? How do you enter the info into PROSERIES. Please provide form/workshhet name and specific line numbers please. Thanks
    • Form 8824.
    • I suggest boning up on how to do a § 1031 exchange.  You need to know what the output should look like before trying to find out the specific form/worksheet/line numbers of the software.

    you can switch to depreciation if you take mileage in the first year.  Read the IRS instructions how to report the trade in.


      Basis of the new vehicle is the remaining basis of the old plus the net price of the new.

      Example: You have depreciated all but $500 on the old vehicle. The amount you actually paid for the new vehicle after the trade in is 25,000. The basis of the new vehicle is $25,500.

      • How di you get the $500 and $25,000? Could you provide the values and calculations you used?  (actually paid was 13,500 (23,000 - 9500 trade in)

        What amounts do I enter in PRO SERIES? Please be specific with form/worksheet names as well as line items.

        Were you able to answer my other questions regarding the reporting of any gain/loss?

      • Charlotte was just giving you an example and did not get her amounts from your amounts.

        Use form 8824 and search Google to learn what you need to know to figure the new basis.
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