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RD, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 8784
Experience:  CPA, MBA, Over 10 yrs of experience in tax planning and business consulting..
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In 2007, I purchased a Dodge sprinter for $38,500 for business

Customer Question

In 2007, I purchased a Dodge sprinter for $38,500 for business use.
I traded in a 2004 Chevy Tahoe. I received a trade-in allowance of $18,000 but I owed $20,000 on the Tahoe.
Am I allowed to take a section 179 deduction for 2007 on $38,500 or some lesser amount?
Submitted: 6 years ago.
Category: Tax
Expert:  RD replied 6 years ago.
You need to determine the adjusted basis of the new vehicle bought. 1031(d) defines the basis calculation for property acquired during a like-kind exchange. It states that the basis of the new property is the same as the basis of the property given up, minus any money received by the taxpayer, plus any gain (or minus any loss) recognized on the transaction. If the transaction falls under 1031(b) or (c), the basis shall be allocated between the properties received (other than money) and for purposes of allocation, there shall be assigned to such other property, an amount equivalent to its Fair Market Value at the date of the exchange.

You can determine the basis of the new property acquired by filling in Form 8824. THis is teh amount that will be eligible for Sec 179 writeoff.


Let me know if you have any question.

Please note: This advice is provided with the understanding that all the relevant facts have been provided by you. Any change in facts might affect the advice given and hence may not be relied on in such cases. Nothing contained in this reply was intended or written to be used, can be used by any taxpayer, or may be relied upon or used by any taxpayer for the purposes of avoiding penalties that may be imposed on the taxpayer under the Internal Revenue Code of 1986, as amended.