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Doing some math, you find that if 25K= 70%, the total cost was was 35.7K, which means 10,700 was NOT depreciated.
If it was worth $15K in trade, then that represents 15/35.7 = 42% value remained at trade-in time. Further, that's about 10.5K of the trade-in value that is attributed to the business use.
If you do this as a like-kind trade, the book value of the business use of the car is zero, but the trade in was worth 10.5K, so that will reduce the depreciable basis of the new car.
There is no realized gain in a like-kind exchange, which this would qualify for.
So the new car is $27700, I would adjust the 15k trade in against it. So the new depreciable basis would be $12700 and depreciated at 70%....
There was a note that was taken on the new vehicle for $23k as well......
The trade in pretty much paid off the old note on the prior vehicle
If you trade in a vehicle that was used partly for business and acquire another vehicle that will be used in your business, you must use the following computation to determine the depreciable tax basis of the replacement vehicle, assuming that the old vehicle was acquired after June 18, 1984. (If the vehicle was acquired before that date, consult your tax advisor for the proper method to use.)
The basis for figuring depreciation for the replacement vehicle is:
On August 5, 1997, Sally Fox purchased a car for $9,000. On June 1, 2001, she purchased a new car for $21,500. She was allowed a $2,000 trade-in on the old car and financed the remaining $19,500. Assume depreciation claimed on the old car was $7,200, based on 80 percent business use over those years. Assume further that if the car had been used 100 percent for business reasons, the allowable depreciation would have been $9,000. The basis of the new car for depreciation purposes is computed as follows:
Adjusted basis of old car
Adjusted basis of new car