Question

Form 4797 shows capital gain associated with sale of a car used partially for rental management

Forum|Forum|4 years ago
March 24, 2022
1 reply
0 views

Hello,

For a few years I had a car that I used for both personal use as well as managing my rentals in Texas. The percentage used for rental management varied over years but they were always a small portion. Over the years, I claimed the expense associated with miles driven for business purposes against my rental income.

Last year I sold this car for $8,500. The fair market value (FMV) of this car when it was placed in service was $18,000. So there was no gain from the sale. I have entered the FMV of the car when placed in service, the sale price, and the portion out of sales price associated with the business use which is $384.

Form 4797 Page 2, "Gain from disposition of property", shows a capital gain equal to $384 for this car. In other words, even though I had no gain from the sale, TT shows a gain equal to the sale proceeds associated with the business use.

Why am I seeing a gain where I had none? It seems that TT has not included the loss from the sale in the computation. What am I doing wrong?

Thanks for your help.

F

fkhalilzAuthor

I may an idea where my data entry might be incorrect for this situation. Below is the TT interview page associated with the sale of a car which is used for both personal use and business use.

Q1. I have calculated the average business use percentage for all prior years the car was used for business by computing total business mile divided by total miles driven over the period used for business. I then multiplied the sale price by this business use percentage to get the 1st box. Is this correct?

Q2. I calculated the 2nd box as follows: (FMV - sale price) x business use percentage. Then I add to this the business portion of sale expenses (i.e. advertising cost x business use percentage). Is this correct?

Thank you!