Business Auto Trade In

[Kram BergGold]

I want to handle this in the way that avoids the form for a like kind exchange. I think this means that I continue depreciating the old car and start depreciating the new car, correct?. Do I reduce the basis of the new care by the trade in? Is it this way or the other way that you attach an election to the return?

[BHoffman]

I want to handle this in the way that avoids the form for a like kind exchange. I think this means that I continue depreciating the old car and start depreciating the new car, correct?. Do I reduce the basis of the new care by the trade in? Is it this way or the other way that you attach an election to the return?

I thought the like-kind exchange form 8824 is supposed to filed for, you know, like-kind exchanges.

But perhaps you could just dispose of the old car (sale price is trade-in value given) on form 4797 and acquire the new car.

[Roland Slugg]

If the old vehicle is traded-in, the LKE rules are mandatory, and so is the filing of F-8824. The place where the T/P does have a choice is how to depreciate the new and old vehicles after a LKE. He can either: (1) depreciate the combined new basis as a single asset, or (2) depreciate the new vehicle's net added cost as a new asset and continue to depreciate the old vehicle as if it were still owned and in service. One of these is the default method, and the other ... #2 if I remember correctly ... is elective.

LKE treatment can be avoided by NOT trading in the old vehicle, as already mentioned in another reply. Instead the old vehicle can be sold outright.