Discussion:SUV exchange for passenger car ?
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Discussion Forum Index --> Tax Questions --> SUV exchange for passenger car ?
| 8 August 2007 | |
| Hello Forum,
I've got a client that exchanged an SUV over 6000 gvwr and a passenger car for one passenger car. Assume 90% business. Question that I can't resolve is what depreciation method to use for the carry-over basis on the new vehicle. From Reg 2000-4, it would appear that I continue with the SUV (not 280f limited) method for that portion of the carry-over, but Reg 1.168 muddies the definition and I'm not sure. Thanks for any input on this, Mark | |
| 8 August 2007 | |
| Was passenger car traded in also a business vehicle (like the SUV) or a personal use vehicle? If the latter and assuming the recovery period of the new vehicle is the same as the SUV, then I see the trade in value of the personal use vehicle being the excess basis (new vehicle basis depreciated by itself). The carryover basis of the SUV would just continue to be depreciated by itself. | |
| 9 August 2007 | |
| Both vehicles were used in the business and both 90%. The total trade of the two cars relinquished was close to the value of the one new luxury vehicle obtained.
Depending on how I read the reg's, it would appear that I can continue to depreciate the c/o basis of the Land Rover over 5 years w/o the 280f limits. Does this seem correct....too good to be true? thanks, Mark | |
| 10 August 2007 | |
| "The total trade of the two cars relinquished was close to the value of the one new luxury vehicle obtained."
Your client must have paid some cash in that case which will be the excess basis (new vehicle basis) depreciable subject to the passenger vehicle limits and I think with a reduction on the excess basis (new vehicle) depreciation for depreciation taken on the other two vehicles in the year of trade. I believe you will have a carryover basis on the SUV as well as on the passenger car traded - assuming not fully depreciated. Both of these will continue to be depreciated just as if they were not traded. The election under 1.168(i)-6T(i) (which I always used) is no longer available after Feb. 26,2007. At any rate, this is my minimal understanding. May be someone with a more in depth grasp of this will comment. | |
| August 10, 2007 | |
| This is sort of similar, but different to a prior discussion about exchanging land for a building:
Discussion:Land_for_Duplex--LIke_kind_exchange-Depreciation_Question I do not believe the prior thread was every fully resolved. | |
| August 10, 2007 | |
| And I seem to recall reading here many months back that, technically, an SUV for a car wasn't like kind, not that anyone's ever cared before... | |
| 10 August 2007 | |
| T.D. 9314. Happy reading Mark16. Vehicles covered in (d)(3). | |
| 11 August 2007 | |
| "Personal properties of a like class are considered to be of a “like kind” for purposes of section 1031. In addition, an exchange of properties of a like kind may qualify under section 1031 regardless of whether the properties are also of a like class. In determining whether exchanged properties are of a like kind, no inference is to be drawn from the fact that the properties are not of a like class." Reg. 1.1031(a)-2(a).
Although the suv and passenger car might have different asset classes, they are still like kind - which should qualify as a 1031 exchange. | |
| 21 August 2007 | |
| Thanks for all the input. I've read the entire reg and cannot find reference on point to the issue at hand. My take of the situation is similar to what Solomon states above and what I will advise my client. It's an unusual trade that I would've recommended against...had he asked me before pulling the trigger. Always emotional with cars.
The point JR1 mentioned about it possibly not being like-kind rings in my head from some reading also. If this wasn't considered a trade, my life would be much easier but can't find anything that states this unfortunately. Any leads on the non-trade possibility would be wonderful. Thanks again, Mark | |
| 21 August 2007 | |
| "Definition of “like kind.” As used in section 1031(a), the words like kind have reference to the nature or character of the property and not to its grade or quality." Reg. 1.1031(a)-1(b). I think you are stuck with a 1031. | |
