Discussion:S Corp - trade in vehicle. How to do this in ProSeries?
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Discussion Forum Index --> Advanced Tax Questions --> S Corp - trade in vehicle. How to do this in ProSeries?
Discussion Forum Index --> Tax Questions --> S Corp - trade in vehicle. How to do this in ProSeries?
| 26 October 2009 | |
| Question for those ProSeries users out there...
I have a client who traded in one vehicle for another, new vehicle. The dealearship used his trade in value towards payoff of the old vehicle loan. I can't figure out how to get to do this in ProSeries. I'm thinking this needs to be a Like-Kind-Exchange on the 8824 but I'm not sure how to do that and show the old vehicle as 'disposed'. ProSeries has some fields in the asset entry screen related to LKE but I'm not sure if it's relevant. I'm racking my brain on this one. Any help you can suggest is appreciated. | |
Death&Taxes (talk|edits) said: | 26 October 2009 |
| I would enter the date of disposition on the Asset Entry sheet of the traded vehcile, nothing else, and then go to 8824. I note that on the 1040 it tells you to enter no more than this information. | |
| 26 October 2009 | |
| OK. But the help screen is confusing regarding this and I'm afraid I'm missing something. If you search Help and look at the topic 'MACRS Property Acquired in a Like-Kind Exchange or Involuntary Conversion ELECT OUT OF REGS UNDER SEC 1.168(i)-6T(i)', there's a bunch of stuff in there under the heading 'Data Entry for using the regulations' regarding excess basis and exchange basis and it doesn't make sense.
Also, would you recommend I do the 8824 manually rather than let ProSeries do it? Believe it or not, in all my years of doing returns, I've never had a LKE. This is a pain. Thanks for your help. | |
Death&Taxes (talk|edits) said: | 26 October 2009 |
| Actually, I often use the Tax Tools program to compute the trade-in. Is this a 100% business auto?
My memory is hazy, but I think that for a short period of time IRS promulgated these rules that one had to have two assets on the book, the one being the undepreciated basis of the traded car and the second being the cash price paid for the new. Then they backtracked and let you elect out of these rules. Or do I have it backwards? | |
| 26 October 2009 | |
| I may have it backwards also but I believe that when you trade in a vehicle or other piece of equipment and do the like kind exchange via form 8824 that is when you are making the election out of carrying two vehicles or pieces of equipment forward. I get a headache everytime I try and read how to handle vehicle trade ins when they are part personal and part business.
I would think that using your tax software and using the like kind exchage via 8824 would be the easiest route to take. I would think that the software would handle this reasonably fine. | |
| 26 October 2009 | |
| I don't have Tax Tools. Yes, 100% business use. I'm so frustrated by this I'm about to just mark the old auto as 'sold' in ProSeries using the trade-in value as the sales price and setting up the new vehicle as a separate asset.
When I do the 8824 in ProSeries, it calculates an $11,000 gain on the 479. I thought the whole point of the LKE was to defer gain. So, I'm losing confidence that ProSeries is handling it correctly. Although, I'm open to the idea that it's user error. By the way, Death&Taxes, I LOVE the Jersey Shore. | |
| 26 October 2009 | |
| What about the bookkeeping for it? It may just be easier to do the w/u and disposal before you tackle the tax return. | |
| 26 October 2009 | |
| I was thinking doing the tax return first would be easier. I was hoping the tax program would tell me what the gain/loss is so I know how to do the journal entries for the disposition. | |
| 26 October 2009 | |
| You're going backwards. The books come first. The tax return is just listing the items from the books. | |
| 26 October 2009 | |
| "ELECT OUT OF REGS UNDER SEC 1.168(i)-6T(i)"
Actually, this Reg. is no longer temporary. As DT noted, to avoid carrying the exchanged property and replacement property on the depreciation schedule, the election out must be made. If the election is chosen, the exchanged basis(old property) and excess basis(additional cash paid for new property) are combined. This, then, is the new basis for depreciation for the replacement property. The old property disappears in a tax free disposition. By the way, the IRS relies upon §6011 and §6012 for a 8824 requirement. At the same time, per an Inspector General report, there is no penalty for not filing a 8824 unless it is a partially taxable exchange - then an accuracy penalty would apply. | |
Death&Taxes (talk|edits) said: | 27 October 2009 |
| On Line 19 or Line 23 of the 8824? Line 19 is the realized gain but Line 23 is the recognized gain, which as you note, should be zero. With a 100% business auto, you should end up that the new basis is the adjusted basis of the old plus the cash paid for the new, (cash including loans taken out, and including sales tax etc). | |
Floridacpa (talk|edits) said: | October 27, 2009 |
| Why not enter the amount received at the net book value - then the 4797 will show zero gain or loss.
The new asset can then be capitalized as discussed (do the debits and credits). | |
| 27 October 2009 | |
| So, I don't have to do an 8824 if I elect not to? Do I make that election on the newly setup auto or the one that was traded in? | |
| 27 October 2009 | |
| You should do a 8824 - the election has to do with the regulation you cited previously - you should read it. | |
| 27 October 2009 | |
| D&T - I posted a response to your talk page or whatever it's called. | |
| 27 October 2009 | |
| D&T, posted another note to your page. Should have just gotten your email address. | |
