Vehicle trade-ins

[Kea]

Am I correct so far?

When I make the election for 1.168(i)-6T(i) treatment of a trade-in, I still file Form 8824 (like kind exchange).

"All" that election does is let me start over on depreciation with one vehicle (and not continue prior depreciation with "old" and "new" components).

I must still use the book value of old vehicle + additional paid for new as the basis of the new vehicle.

I still defer gain / loss on old vehicle.

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More confusion---

My client uses his truck primarily (but not 100%) for business. When he gets a new truck, he trades-in the old one. I thought I was getting the hang of this, but now I keep taking myself in circles and am getting confused.

Does anyone have a good comprehensive IRS (or other source) example or spreadsheet? Ideally showing a series of trade-ins. Veh 1 for veh 2 then a few years later veh 2 for veh 3.

I do have one basis for depreciation (including personal use adjustment) and another separate basis for disposition for previous vehicle.

One of the places I'm am getting confused is with the business basis (basis * business % less depreciation taken). This figure has been completely adjusted for business use. If I carry that forward into the basis for the new vehicle (adding additional money paid), then take business percentage of that .... that just doesn't work.

I know I'm making this harder than it is.

Thanks so much.

[MontanaEA]

Kea,

1. The first part sounds correct to me.

2. The key to remember is, the basis of the new car is:

- the original cost (100%, not just the business portion)

- less the depreciation allowable if the old car had been 100% business

- plus cash boot paid for the new one

- times percent business use of the new one.

[Kea]

Your explanation sounds like what I am doing for calculating the basis for depreciation.

I'm more (if possible) confused about the basis for eventual disposition and / or next trade-in.

I'm starting to think I can't just carry forward one number for the disposition basis. Would this make sense?

Original basis for vehicle 1 * weighted average of business use for vehicle 1

+ boot for vehicle 2 * weighted average of business use for vehicle 2

.... + boot for vehicle n * weighted average of business use for vehicle n

less total depreciation taken for all vehicles involved

Then if client ever actually sells a truck, I would subtract the selling price * percent business use (weighted over all vehicles?)

[SCL]

kea - you are not making it harder than it is - imo it is a very difficult area of tax law.

esp when you add in less than 100% business use.

over twenty years i do maybe 4 a year, and each time the only way i get through it is from reference worksheets (TTaxBook or QuickFinders), beating it to death, and adding years and grey hair to my life.

[Kea]

I could not find a comprehensive example / reference worksheet in Quickfinders. I found examples for the various parts and that is what I have used. It's when I start putting everything together, that I try to confuse myself. Was my last example correct?

And am I correct that the final amount that I calculate for the Form 8824 is the same as the disposition basis? Or, is there yet another calculation I need to make?