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PDtax
PDtax, CPA firm owner
Category: Tax
Satisfied Customers: 1892
Experience:  32 years tax experience, including four years at a Big 4 firm.
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How can/should I fill out Form 8824 with the following information

Resolved Question:

How can/should I fill out Form 8824 with the following information provided:

1. Gross Trade-In allowance (Old Vehicle) = $10000
2. Less Pay Off Made by Seller = $14650
3. Equals Net Trade In = $4650
4. +Cash = $3500
5. Difference of Line 3 and 4 = $1150
6. New Vehicle being purchased = $34900
7. Other charges including amoounts paid to others on my behalf = 2961.48
8. Finance Charge on new vehicle = $6667.27
9. Amount Financed = $38423.45
10. Sum of Line 8 and 9 = $45090.72 (Total Sale Price of new vehicle)

Based on this info, can someone show me please where or how to plug in these values into Form 8824.

Thank you in advance,

Maria
Submitted: 1 year ago.
Category: Tax
Expert:  PDtax replied 1 year ago.

PDtax :

Welcome to the site. I will be helping you today.

PDtax :

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.

PDtax :

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.

PDtax :

start on line 15 of 8824, and enter the amount of money received (0).

Customer:

This is an individual 1040 return that I am filling out. I did not receive any money

PDtax :

line 16 is the basis of the property received, which is the purchase price 34900 + charges of 2961.48.

Customer:

and the car is used for business purposes

PDtax :

I know you didn't receive any money. The form requires that you start on line 15.

Customer:

ok

PDtax :

line 17 is the sum of 0 and 34900+2961.48.

Customer:

so the total on line 17 would be 37861.48

Customer:

ok

PDtax :

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).

PDtax :

line 19 is the realized gain you recognized in the transaction. Since you didn't receive any money, your realized gain is 0.

PDtax :

line 20 is the amount of gain to recognize (depreciation recapture). Enter 0.

Customer:

so the total cost minus depreciation = $16000 - $5760.00 = $10240.00

PDtax :

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).

PDtax :

again, line 20 is 0, line 21 is 0. 22 is 0. 23 is 0. 24 is 0.

PDtax :

25 is 37861.48.

Customer:

what is "boot" in accounting/tax terminology?

PDtax :

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.

Customer:

ok, understood. Thank you.

PDtax :

Thanks for asking at Just Answer/Pearl. Ask follow up questions if you have them.

Customer:

yes, what do we fill out in the bottom of form 8824

Customer:

what is the basis of my new asset?

PDtax :

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.

Customer:

Do i still require to fill out Form 4797 when the vehicle is used in the business when it is an individual tax.

Customer:

Refer to the below screen capture for more detail . . .

PDtax :

yes you do.

Customer:

can you provide us assistance on how to fill out form 4797 with the info that we already have?

PDtax :

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.

Customer:

What is my new basis of my new asset?

PDtax :

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.

PDtax :

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.

PDtax :

Is there anything else?

Customer:

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

Customer:

Where does the cash that he paid into the deal gets placed (= $3500)?

Customer:

When you purchase a new vehicle and you incurr finance charges, what would be the depreciation total?

PDtax :

Did you receive $3500 cash as part of the transaction?

Customer:

No, this is what I paid

Customer:

as a down payment

PDtax :

Was it a factory rebate or purchase of your truck?

Customer:

no

Customer:

Full Size Image

Customer:

Look at this screen capture and in line 1 - 8 what figures would be placed here then?

Expert:  PDtax replied 1 year ago.
sorry, had to change to Q & A format to finish up.

The cash you paid down has no impact on the tax gain/loss. Just depreciate the new truck with the basis figures we worked out. You do not need 4797 or 8824 as part of your return.

Thanks again from Just Answer/Pearl. Positive feedback (and bonus if appropriate) lets management know you are happy with my work today.
Customer: replied 1 year ago.


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?


 


Thanks.

Expert:  PDtax replied 1 year ago.
Sorry, I see that you had questions relating to data entry for a tax return. I am sorry, but I can't answer them in this forum.

doing so is akin to preparing your return, and we are not allowed to do that. We can answer questions, which I did, about forms, and calculations of basis, which I did.

Our rules of service limit what we can do. I will opt out and return your question to the queue.
PDtax, CPA firm owner
Category: Tax
Satisfied Customers: 1892
Experience: 32 years tax experience, including four years at a Big 4 firm.
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