Have a Tax Question? Ask a Tax Expert
Welcome to the site. I will be helping you today.
the form is required for business trade-in treatment for the car tradein you described. Let's assume this is 100% business use for both vehicles.
Using this form for Section 1245 property (depreciable assets like a car) requires reporting the sale on Form 4797. Use this form to report the depreciation recapture, if any, as part of the 1245 sale report on form 4797.
start on line 15 of 8824, and enter the amount of money received (0).
This is an individual 1040 return that I am filling out. I did not receive any money
line 16 is the basis of the property received, which is the purchase price 34900 + charges of 2961.48.
and the car is used for business purposes
I know you didn't receive any money. The form requires that you start on line 15.
line 17 is the sum of 0 and 34900+2961.48.
so the total on line 17 would be 37861.48
line 18 is the adjusted basis of the property you gave up. That's the original purchase price of the car, less depreciation taken to date (not listed in your figures).
line 19 is the realized gain you recognized in the transaction. Since you didn't receive any money, your realized gain is 0.
line 20 is the amount of gain to recognize (depreciation recapture). Enter 0.
so the total cost minus depreciation = $16000 - $5760.00 = $10240.00
yes. Since you didn't receive any money in the exchange (we call that boot) there will be no tax to report on the sale of your car (I know it's a trade-in).
again, line 20 is 0, line 21 is 0. 22 is 0. 23 is 0. 24 is 0.
25 is 37861.48.
what is "boot" in accounting/tax terminology?
boot is the amount of cash received in a tax free exchange. Your taxable gain is limited to the amount of boot received. You received $0, so you do not have a taxable gain to report on 8824.
ok, understood. Thank you.
Thanks for asking at Just Answer/Pearl. Ask follow up questions if you have them.
yes, what do we fill out in the bottom of form 8824
what is the basis of my new asset?
you can stop at line 25. In fact, since there is no gain to report, you can probably leave the 8824 out of your return completely.
Do i still require to fill out Form 4797 when the vehicle is used in the business when it is an individual tax.
Refer to the below screen capture for more detail . . .
yes you do.
can you provide us assistance on how to fill out form 4797 with the info that we already have?
Your old truck had a adjusted basis of 10,240. Your dealer gave you 10,000 value for the vehicle. Add the difference of $240 to the basis of the new one for depreciation purposes.
What is my new basis of my new asset?
Form 4797 will not be needed, since ithe truck was sold at a tax loss of $240. Just add the $240 to the 37861.48 as depreciable basis for the new one.
4797 is only required when there is a taxable gain to report as depreciation recapture or gain on purchase (that's the boot thing again). Since there is no tax gain, 4797 is not needed.
Is there anything else?
So you lost me on what values get placed on line 7 and 8 of the Like-Kind Exchange part of the form "Asset Sale, Exchange, or Disposition
Where does the cash that he paid into the deal gets placed (= $3500)?
When you purchase a new vehicle and you incurr finance charges, what would be the depreciation total?
Did you receive $3500 cash as part of the transaction?
No, this is what I paid
as a down payment
Was it a factory rebate or purchase of your truck?
Look at this screen capture and in line 1 - 8 what figures would be placed here then?
We were not finished. I still had followup questions. You went offline and did not reply to them. Can you still reply to them or do I need to invoke someone else?