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Discussion Forum Index --> Basic Tax Questions --> Business vehicle traded in for personal vehicle
Discussion Forum Index --> Tax Questions --> Business vehicle traded in for personal vehicle
Lrussell (talk|edits) said:
| 30 October 2007
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| My client is an S-corp (one owner) whom traded his work vehicle in for a personal vehicle. The work vehicle had a basis of about $26,000. The trade-in value received was $20,000. Two months later he traded another personal vehicle in for a new business vehicle. I don't believe this would qualify as a 1031 exchange. Do I record the first transaction as a property distribution and do I record the distribution in the amount equal to the fair market value ($20,000) or at its basis? It doesn't seem equitable to my client to record the distribution at the adjusted basis because he didn't receive $26,000 in value.
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Solomon (talk|edits) said:
| 30 October 2007
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| I would treat the work vehicle traded for a personal vehicle as a conversion from business to personal use.
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Lrussell (talk|edits) said:
| 30 October 2007
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| So I would debit distributions and accumulated depreciation to the date of conversion and credit the asset? In other words my client would take a distribution for $26,000? Unfortunately, for him this will be a taxable gain since he doesn't have any basis left in the company (and expecting a loss for 2006).
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TheTinCook (talk|edits) said:
| 30 October 2007
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| Since he only had it for two months how about leaving it in the corp? The shareholder will have to pick up income for the personal use, but it might be the lessor evil.
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Lrussell (talk|edits) said:
| 30 October 2007
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| sorry for the confusion. The business vehicle that was traded in for a personal vehicle, the owner did not have it to use personally as it was traded in the same day you could say it was converted to personal use. Two months later he traded in a DIFFERENT personal vehicle (worth basically nothing - loan against vehicle was as much as value) for a new business vehicle. The transactions really didn't have anything to do with one another, just thought I'd add this in case there was some sort of 1031 exception I was unware of.
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