Discussion:1099-A - Schedule C truck

From TaxAlmanac, A Free Online Resource for Tax Professionals
Note: You are using this website at your own risk, subject to our Disclaimer and Website Use and Contribution Terms.

From TaxAlmanac

Jump to: navigation, search

Discussion Forum Index --> Basic Tax Questions --> 1099-A - Schedule C truck


Discussion Forum Index --> Tax Questions --> 1099-A - Schedule C truck

Rbcpa (talk|edits) said:

28 February 2010
Taxpayer received a 1099-A for an abandoned truck that was used in Schedule C business. Basis is $24,000; Outstanding Principal is $19,000 and FMV is $13,200. Truck was 70% business use.

Debt forgiveness income should be $5,800. Is the loss between basis and FMV treated as capital loss even though business usage is only 70%. I know this is no excuse, but Proseries is putting the entire difference between basis and FMV on Schedule D. Can't seem to find anywhere in Proseries that allows you to apply a business usage % to the abandonment.

Guess I shouldn't be working on these types of returns at 2AM. Brain is tired!

DaveFogel (talk|edits) said:

28 February 2010
Did the lender cancel the debt? Issuing a Form 1099-A doesn't indicate that the lender canceled the debt. Also, in calculating the $24,000 basis, is this net of depreciation?

What you have to do is to set up a table separating the business and personal portions of the truck. If the lender canceled the debt, then the difference between the debt and the FMV of the truck would be cancellation of debt (COD) income. 70% would be reported on Sch. C, and the balance as other income on Form 1040, line 21. Loss would be calculated as 70% of the FMV minus the business portion of the adjusted basis, and this would be reported on Form 4797. See the example below, where I used $4,000 as depreciation:

Image:Table1.jpg

Rbcpa (talk|edits) said:

28 February 2010
Yes, debt was canceled, has letter from Ford Credit, and $24000 is net of depreciation (original PP - $35000).

That makes more sense to me. The one thing I didn't consider was the $4000 of COD income reported on Sch C as SE Income vs. Line 21. Now I just have to convince my tax software how to allocate it the right way.

Thanks.

To join in on this discussion, you must first log in.
Personal tools