Curse you tax man!

[cabmandone]

And those who make the laws! I was talking with my accountant last night about my plans for my F250 in the event I decide to go to work for a company. I told him I planned to trade my truck in and get a smaller, more fuel efficient truck. He said "Just let me know what they give you on trade. The trade equity is now taxable as income for business vehicles". DAMMIT! I said. Apparently one of the changes for businesses in the new tax code is that a vehicle used for business and depreciated or, as I did, 179'd is now taxable as income whether you trade the vehicle or sell it. Just my luck! A chance to get good money out of my truck on trade for a new compact and the tax man says "gimme mine!"

[jhynesrockmtn]

The tax would be on the gain, if any, correct? If a business asset, I would have thought any gain was always taxable. I'm no expert though, CPA license lapsed more 30 or so years ago.. I suppose a gain is more likely these days. My oldest daughter has a used MDX she bought used 3 years ago. The dealership is bugging her. They say it's worth more than she paid.

[pwd72s]

You must be rich. I recall something about how they only want to tax the rich, who never seem able to "pay their fair share".

[Tervuren]

Imagine if capital gains taxes had to first beat inflation...

[L8Brakr]

Males sense that a business asset that has been fully depreciated (said depreciation used to offset prior income in prior periods) would provide taxable income when sold or traded for a specific value in the current period. What am I missing?

Fully depreciated for this discussion does mean the asset has a book value of $0.00, correct? Thus selling/trading it for value represents an income to the business??

[group911@aol.co]

You could always sell it for so little that those stupid rules won't bite you.

[cabmandone]

Originally Posted by group911@aol.co

You could always sell it for so little that those stupid rules won't bite you.

I'm thinking about gifting it to my dad. I'm waiting to see what happens if he decides to trade the truck in or sell it.

Originally Posted by jhynesrockmtn

The tax would be on the gain, if any, correct? If a business asset, I would have thought any gain was always taxable. I'm no expert though, CPA license lapsed more 30 or so years ago.. I suppose a gain is more likely these days. My oldest daughter has a used MDX she bought used 3 years ago. The dealership is bugging her. They say it's worth more than she paid.

That's the thing! when I Sec 179'd the truck that makes everything a gain. So because I expensed the truck all in one year, if I get $25,000 in trade, I will have to show $25,000 in taxable income. It used to be that I could do a tax free exchange on personal property (business vehicles)

[jhynesrockmtn]

Originally Posted by cabmando

I'm thinking about gifting it to my dad. I'm waiting to see what happens if he decides to trade the truck in or sell it.



That's the thing! when I Sec 179'd the truck that makes everything a gain. So because I expensed the truck all in one year, if I get $25,000 in trade, I will have to show $25,000 in taxable income. It used to be that I could do a tax free exchange on personal property (business vehicles)

That's the bit I wasn't aware of, yikes, and again shows why I pay Jennifer the CPA to do my taxes.

[berettafan]

What happened is like kind exchanges were limited to real estate.

In the past a vehicle trade just rolled the gain into the new one. Now what happens effectively is you are selling the vehicle and buying another. If the new one can't or won't be 179'd or bonus depreciated then you might end up with more gain on the sale than depreciation on the new purchase.

[GH85Carrera]

It is the same with our airplane. Only a lot more money. We are going to depreciate over a period of several years. It is all a tax law BS shuffling money around to avoid (NOT evade taxes.

The current tax code is so complex and convoluted no human on the planet knows it all, and it changes constantly. We work hard and pay out CPA a nice hunk of change to to the company tax filings. If someday we ever sell the airplane we will take a large tax hit from the profit.

Congress is solely responsible. Thousands of special interests add in little perks for themselves. Our entire tax code should be scrapped, and start all over. I should be reduced to a few dozen pages at most. End the near endless special tax breaks. Go to a flat rate, no deductions for anything. It will happen right after there is peace in the middle east, and the we find a source of free clean energy.

[sc_rufctr]

Why not give the truck to your wife... And then at some point she wants something new so she sells it.

Probably against some sort of rule or law but I thought I'd suggest it anyway.

(Do you remember the rooftop scene with "Andy" from The Shawshank Redemption?)

[group911@aol.co]

Probably one of the biggest beneficiaries were the auto companies that pushed the ability to write off the entire cost in the first year for work trucks especially. Now that I think about it, it's kind of surprising how much stuff you can expense rather than depreciate in the first year.
Of course, if you die, that airplane gets stepped up in value and your heirs don't take the hit.
https://www.irs.gov/taxtopics/tc704

Originally Posted by GH85Carrera

It is the same with our airplane. Only a lot more money. We are going to depreciate over a period of several years. It is all a tax law BS shuffling money around to avoid (NOT evade taxes.

The current tax code is so complex and convoluted no human on the planet knows it all, and it changes constantly. We work hard and pay out CPA a nice hunk of change to to the company tax filings. If someday we ever sell the airplane we will take a large tax hit from the profit.

Congress is solely responsible. Thousands of special interests add in little perks for themselves. Our entire tax code should be scrapped, and start all over. I should be reduced to a few dozen pages at most. End the near endless special tax breaks. Go to a flat rate, no deductions for anything. It will happen right after there is peace in the middle east, and the we find a source of free clean energy.

[berettafan]

No step up on the airplane if it’s in the business. The step up would be on his stock.

[GH85Carrera]

Yea, the airplane is our pickup work truck. I am not a pilot. My business partner is the pilot. He is past the point that flying for fun is something he wants to do. We only fly for paying jobs, or for maintenance, like oil changes or to go to the avionics shop. No $400 hamburger runs.

The business pays for the airplane loan, and all costs. It is just a neat piece of glorified office equipment. The good news is it has actually increased in value.

[cabmandone]

Originally Posted by berettafan

What happened is like kind exchanges were limited to real estate.

In the past a vehicle trade just rolled the gain into the new one. Now what happens effectively is you are selling the vehicle and buying another. If the new one can't or won't be 179'd or bonus depreciated then you might end up with more gain on the sale than depreciation on the new purchase.

This was my thinking on the new vehicle. I'm going to have no business income in 2022 if I decide to go to work for someone else. I might trade the truck, show the income for the trade and then 179 the new truck. I'm just not sure how the IRS would view income of, let's say, $26,000 and a 179 of $28-34K. And I'd be left with a carry over since I can't 179 myself into a business loss if I'm not mistaken.

[berettafan]

Correct you cannot 179 into a loss.

Keep in mind if you're an S and close the business down the assets come out at FMV even if you don't sell them. So you've got a sale either way. Talk with your tax chick as there might be a couple ways to handle this, particularly if KBB puts a lower value on the truck than a dealer would.

[cabmandone]

Originally Posted by berettafan

correct you cannot 179 into a loss.

Keep in mind if you're an s and close the business down the assets come out at fmv even if you don't sell them. So you've got a sale either way. Talk with your tax chick as there might be a couple ways to handle this, particularly if kbb puts a lower value on the truck than a dealer would.

llc.

[greglepore]

Isn't it only fair if you get to depreciate it? Same thing with rental property, you can depreciate it but then have to pay tax on the depreciated basis.
The idea of depreciation is that the asset loses value with age. But if its sold for more than its depreciated value, you have a gain.

[cabmandone]

Originally Posted by greglepore

Isn't it only fair if you get to depreciate it? Same thing with rental property, you can depreciate it but then have to pay tax on the depreciated basis.
The idea of depreciation is that the asset loses value with age. But if its sold for more than its depreciated value, you have a gain.

I'm not saying it's unfair. I'm just saying that before the new tax law back in 2017, I could trade the truck and have no taxable gain as it was rolled into the new truck. Curse you tax man!!

[sc_rufctr]

So effectively you pay tax on the new truck and you also pay tax on the trade in?