Discussion:Is this a taxable transaction
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DR BRISKET (talk|edits) said: | 3 April 2007 |
| Hello, forum members. I'm needing some help here. Its way too late in the season, and my brain is about drained!! In 2005, sole proprietor purchased a heavy van for $28,000. Sec 179 for full $28K was claimed on '05 return. A loan was taken out on this van. In 2006, when loan was down to $25,000, client sold this van for $23,000 to an individual. In addition, this individual gave my client another service van worth about $7,500. My client paid off the loan using the $23,000 plus $2,000 of his own money. When the dust settled, my client was out from underneath the bank loan for his old expensive van. In its place, he has a smaller van worth $7,500. Plus, a Section 179 was taken for $28K on the van he got rid of. Please advise how such a set of transactions needs to be handled. Thanks. | |
| 3 April 2007 | |
| I would say do an 8824 tax free exchange on new service van. You end up with 0 basis in new van. Now the bad news. Recapture 20,500 of 179 depreciation. | |
Rgtaxservice (talk|edits) said: | 3 April 2007 |
| From the hip I'd say the exchange results in a zero basis in the new van and a recapture of 15500 minus the 05 depreciation and any 06 depr prior to sale. You need only recapture the unused sec 179, not all of it. | |
| 3 April 2007 | |
| Willy can do this in his head...I can't anymore. On a straight cash basis there is 30,500 for 28,000 so §1231 comes into play. Listed so A/D is what 5,600? | |
| 3 April 2007 | |
| I vote 14,900 §179 recapture 5,600 §1245 gain 2,500 §1231 gain. ♫ | |
DR BRISKET (talk|edits) said: | 4 April 2007 |
| Dennis, thanks for your input. Using your approach, am I correct in saying the $7,500 replacement van would have zero basis? | |
| 4 April 2007 | |
| I have read pubs 544 & 551 from beginning to end. Sometimes I have a hard time wrapping my brain completely around certain issues. This original post is no exception. I understand how Dennis calculated his above stated results. What I can't figure is this:
1. If gains and 179 recapture must be reconized, thereby taxable income, why wouldn't the replacement property carry a basis of $7500. What am I missing here? 2. How and where, in ProSeries, do you put the information for the various gains and recapture to be calculated? (I know I'm slow sometimes, so, go ahead and think it, just don't say it :) | |
| April 4, 2007 | |
| PS doesn't handle exchanges. Not just well, but at all. Must be a programming nightmare. | |
| 5 April 2007 | |
| There is a worksheet (I have seen it, I know I have..It's in there somewhere.) As far as my guess(?) it has to add up to $23,000 because that was boot. Leaves nothing left for truck. | |
| 5 April 2007 | |
| Amount Realized for the Van relinquish was 30,500 : 23000 cash and fmv of small van 7500.
ad basis was zero. gain realized 30,500. Boot received was 23,000 (cash). Gain recognized = smaller of gain realized or boot received = 23,000. Basis of replacement property (smaller van received) is zero: = AB of property given + gain recognized - boot received = 0 + 23000 -23000. | |
