Voluntary Repossession

[S T]

I think that is what it is called.

Sched C Business Taxpayer running into financial difficulty in 2009, so makes arrangements to turn a vehicle back to GMAC voluntarily.

Business use of the vehicle is approximately 60% - turned in to GMAC August 09.

I have to dispose of the vehicle in 09 - so what do I use for the sales price??

Do I use -0- or the amount that was left owing on the GMAC Finance Contract? Keep in mind that there could be a possibility of receiving a 1099C in year 2010

Thanks,

Sandy

[Gretel]

That probably depends on their agreement. If turned over for balance on loan I would use this amount as sales price. If bank is thinking of forgiving debt, that needs to be factored in.

Let's say if balance on loan is $3000 but they sell it only for $2000 or tell customer it's deemed to be $2000, then sales price would be $2000. I don't know if this is same handling as home repossessions or if you will need to wait until they sell car again.

[S T]

Issue

Thanks Gretel,

That is the issue, we don't know if GMAC will issue the 1099C - so far no paperwork, and the business use dropped below 50% in 2009 (August 09 to be exact)

Wouldn't I have to report the recapture for sure on the depreciation?

However, if a 1099C is not received in 2010 - there is still the sale (or foregiveness) regardless of reporting on a 1099C.

Sandy

[Gretel]

That is the issue, we don't know if GMAC will issue the 1099C - so far no paperwork, and the business use dropped below 50% in 2009 (August 09 to be exact)

Wouldn't I have to report the recapture for sure on the depreciation?

However, if a 1099C is not received in 2010 - there is still the sale (or foregiveness) regardless of reporting on a 1099C.

Sandy, if I understand right, then TP used this vehicles until Aug 09 over 50% for biz. At this time he disposed of vehicle, so you would not have drop below 50%.

Even if there is no paperwork yet there should be some kind of verbal agreement between your client & GMAC. Your client might even want to pay difference if car doesn't sell high enough instead of getting 1099-C?

If not and GMAC needs to wait until sale of car then I would suggest waiting to file tax return as well.

[S T]

More Info Vol Repo

Finally spoke with the BK Attorney, and he said ( yes I know - can we trust that statement), Gmac should not issue a 1099C for cancellation of debt on the Voluntary Repo, I do have some paper for the Registered Agent for GMAC to accept the voluntary Turn In of the vehicle.

Since the vehicle is no longer a Business Use Vehicle for the Business Use Percentage, don't I have to dispose of in the year that event occured.?

And the sales price for the vehicle would be the amount of the debt that was left owing at the time of the transaction?

Thanks for any assistance

Sandy

[S T]

Disposition of Asset -09

This is a bump

Hope someone can give some assistance

Thanks,

Sandy

[taxea]

dispoition date is date car was turned over. There is no sale price...just put the date in and leave the rest of the form as is.
You may have to amend the return should GMAC send anything at a future date, however, if it is a 1099 dated in a different year the the reporting goes on that year.

[Gretel]

Sandy, I would use the loan amount as sales price since it seems this is what GMAC agreed upon. I view it as a deemed sale.

If they send a 1099 (which they shouldn't) then this would be the second transaction to deal with, namely forgiveness of debt. That could have effect on the sales transaction.

For now I would assume that never happens anyway and just report the sale with the loan balance as sales price.

[Jesse]

Just my opinion -

I'm not sure why someone would suggest there is no sales price, perhaps there is some logic I am missing with further guidance needed - wouldn't be the first time.

I would agree with Gretel's approach, the 2009 deemed sale price being the amount of debt relieved.

If GMAC receives the vehicle back wouldn't they try to resell and recoup the debt. If they receive as much or more there is no cancellation of debt. If they receive less there is cancellation of debt and if personally liable a 1099C will probably be issued in 2010. I would think you would need to deal with that in 2010 with possible 982 for bankruptcy or insolvency.