Question

Loss on Sale of Business Property Calculations

Forum|Forum|5 years ago
February 20, 2021
1 reply
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In October of 2019 I purchased a Cargo Van for my franchise-based business. The total price was $16,927 including taxes and prep to put it into service. On my 2019 tax return, I used Part V Form 4562 and was allowed a depreciation deduction for the total price. This is the amount shown on Line 13 of Schedule C. I ended up with a net loss on this business of ($26,798). I have a net loss from a different business during the same tax year of ($6,555) (shut down one business and started a new one in the same year).

I'm currently preparing my 2020 taxes. I sold the vehicle in July of 2020. I'm having trouble understanding what information to provide on the Car & Truck Expenses Worksheet and what the calculation are or should be on the sale. The original purchase price was $16,927. The sales price was $10,500. Depending on what values I enter in the worksheet, I get a gain on the sale of either $16,927 or $10,500. My simplistic calculations tell me that the sales price of $10,500 and the original price (basis) of $16,927 should net a loss of $6,427. Can someone walk me through the calculations the TurboTax would/should make in this situation?

TurboTax Home & Biz Windows

Rick19744

Employee

Based on your facts you have the following:

You placed the vehicle in service in 2019 and expensed the entire purchase price; most likely through bonus depreciation.
So at this point, you have zero basis in the vehicle.
You now sold the vehicle for $10,500; this is your sales price. With no cost basis (since you depreciated it entirely in 2019), you now have a gain of $10,500.
All of this gain is subject to depreciation recapture since this is the lesser of the gain or depreciation taken.

*A reminder that posts in a forum such as this do not constitute tax advice.Also keep in mind the date of replies, as tax law changes.