Can someone tell me how to declare trading in farm tractor for a new farm tractor?

Yes. First you will sell the old tractor, a trade-in is no longer allowed for personal property, only real property.

• Real Property - Land, buildings and their structural components
• Personal Property - Everything else (both tangible and intangible) -- the tractor

You need to dispose of the property by telling TurboTax how and when it was disposed of.  Follow the instructions below.

1. Go Income > Scroll down to Rent, Royalties and Farm
2. Click Start next to Farm Income and Farm Rental > Proceed through the interview to enter your farm income and expenses
3. Click Update to the right of Assets/Depreciation.
4. Click Edit to the right of the tractor you disposed of
5. Go through screens until you get to Tell Us More About This Farm Asset
6. Click on This item was sold…….   And continue to answer the questions
7. Be prepared with the selling price (trade-in amount) and any selling expenses, date of sale
8. TurboTax will determine gain or loss and carry it appropriately to your tax return.

Next add a new asset for the new tractor using the actual cost ($40,000) including purchase expenses (sales tax, etc). Continue to answer the questions about the new tractor. TurboTax will handle the new tractor and the sale of the old one.