Car Depreciation Question

Forum|Forum|4 years ago
June 12, 2021
2 replies
0 views

I freely admit this is blowing my mind...I don't remember it being this difficult 5 years ago when I got this car!

I'm using TurboTax Home and Business 2020 if that makes a difference.

OK, so my Mom gifted a car (Car A) to me in 2016 (on 1/1 so that made taxes a lot easier). Total gift as in I did not have a purchase price - I paid for all of the registration fees, taxes, etc., as I am in a different state. There was nothing owed on the car.

In June 2021, I decided to buy a new car (Car B). I had to actually get a car loan (haven't had one since before I started my business, so I didn't have to worry about any of that). I had no need to keep Car A, so I gifted it to my Dad. Well, you can't "regift" a gift in my state, so technically I "sold" it to him for $1.00 (that I never received....hmmmmmmmmmm might need to bring that up on my birthday🤔 🤔).

Now TurboTax is asking me all sorts of questions about Vehicle Cost and purchase price and sale price and valuation of depreciation over the course of the time I had Car A, and I'm totally lost. I "bought" it for $0.00. I "sold" it for $1.00.

Both Car A and Car B are a mix of personal and business use, as I have a direct sales business (think something like Mary Kay) so I might use the car to get my groceries or meet with friends for drinks, but I also use it to drive to parties at my hostess' homes.

None of the examples that I'm getting from the Help section are really hitting it for me (I may just be having trouble finding what I need). Also, I fell down this rabbit hole which was informative when it came to calculations, but also confusing as the two experts seemed to differ: https://ttlc.intuit.com/community/business-taxes/discussion/question-about-sale-of-business-property-for-a-vehicle/01/1876486#M62565

Any help would be appreciated as to how I should proceed with Car A and Car B on my 2020 Schedule C

TurboTax Home & Biz Windows

Carl11_2

Employee

For Car A - Work through the business vehicle section and select the option for "I stopped using this asset/vehicle in 2020" and continue working it through. When presented the "Specialy Handling Required?" screen, read that screen so you'll understand why I'm telling you to click the YES button. Then click the YES button. Finish working it through, and that does it. You will "NOT" be asked for a sales price of the vehicle, but you WILL be asked for a "date of disposition" that you will need to enter. Typically, this would be the last day the vehicle was used in the business.

prbymichelleAuthor

Thank you for the information.

I will tell you I answered the questions as best as I could and never got to "Specialty Handling Required" which means I'm missing something somewhere.

I literally only used this for like 125 business miles last year. And somehow adding in the car that I purchased is telling the system that I now have a $7,000+ loss in my business. That turned my audit risk to "high" very quickly!

I might just need to take a break to come back to this. I swear it didn't used to be this complicated!!!!!! 🙂

Thank you, though, for getting back with me, I appreciate it!

AmeliesUncle

You Gifted the vehicle to your dad. A Gift is essentially converting it to personal use, so you need to tell the program you converted it to personal use. That should solve your problems (although your dad may need to know some information about your business usage whenever HE sells the vehicle.

prbymichelleAuthor

Thank you, @AmeliesUncle and @Carl11_2. I'm not that worried about my dad ever selling this car, as it is currently the "dog" car -- meaning whenever they have to take the dogs somewhere, that is what they use to ensure dog hair doesn't get into my Mother's car, and one of the three dogs is too old to climb into my Father's truck, but can get into this one OK, so it is easy for them to transport the dogs. As the dogs currently outrank their children, they will probably not ever get rid of this car. 😁

I have a related question if you don't mind. May be simple but it isn't to me.

I gifted Car A to my Dad, then purchased Car B. When I'm doing turbo tax it asks if I had any other vehicle available for personal use in 2020. Technically, yes, if you look at overall 2020, but NOT when I owned either car. Meaning I had no access to Car B during the time I owned Car A, and vice versa.

I'm OK answering "No" to the did I have any other cars available during 2020...that is the correct answer, right?