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Lev
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 28084
Experience:  Taxes, Immigration, Labor Relations
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A truck was purchased business costing $53,242. A

Customer Question

A truck was purchased for a business costing $53,242. A trade in for a similar truck was given for $23,000 and the loan on the old truck (around $19,000 loan) was paid off. The taxpayer had never depreciated the old truck and used mileage to deduct the
Auto expenses in previous years. My Question: Can you help me and compute the amount of section 179 the tax payer can take?
Submitted: 1 year ago.
Category: Tax
Expert:  Lev replied 1 year ago.
Hi and welcome back!
When the transportation expenses are deducted using the standard mileage rate - the accumulated depreciation is calculated based on special rates
See IRS publication 463 - page 25
http://www.irs.gov/pub/irs-pdf/p463.pdf
Rate of Depreciation Allowed in Standard Mileage Rate
Year(s) Depreciation Rate per Mile
2014 $.22
2012–2013 .23
2011 .22
2010 .23
2008–2009 .21
2007 .19
2005–2006 .17
2003–2004 .16
2001–2002 .15
2000 .14
So while that to be verified - I assume the truck is fully depreciated and its adjusted basis is zero.
So far - there are two options
- to report the disposition of the old track (the gain will be realized) as the sale and report the purchase of a new track for $23,000 + $19,000 = $42k
- use section 1031 exchange - in this case the gain will be partially recognized on the loan boot - $19k - and the rest will be deferred under section 1031.
In both cases section 179 deduction for the new truck would be allowed up to the maximum $11,460 in 2014 prorated by the business use.