Reduction of basis and....excess income?

[Black Bart]

Client had a 2002 Dodge truck bought new in '02 for $16,000 and took standard mileage rate every year. He sold it for $12K in Feb. '06.

I looked up the "depreciation component" portion of the mileage allowance and it's 15, 16, 16, and 17 cents respectively for '02, '03, '04, and '05. Total business miles driven for those years was roughly 200K and multiplying that by those cents per mile totals up to about $31,000 -- reducing the original $16K basis to zero and giving him a 100% gain on the sale. But...my question is this: What about the $15K overage and negative difference? Is that just ignored or does/would IRS say there's a taxable gain there?

[Bees Knees]

TTB page 10-5:

"DID YOU KNOW? If depreciation figured using the standard mileage
rate exceeds the adjusted basis in the car, the car is considered fully
depreciated and no additional depreciation can be claimed under the
actual expense method. However, this does not prevent the taxpayer
from continuing to use the full business standard mileage rate to figure
a deduction. The depreciation standard mileage rate is only used for
purposes of calculated gain or loss if the vehicle is sold, or calculating
depreciation when switching from the standard mileage rate to the
actual expense method."

In other words, once the depreciation component of the standard mileage rate reduces basis to zero, no more depreciation is allowed, even though you can continue to use the full standard mileage rate. There is no such thing as negative basis. Gain can never be greater than cash received on the sale. If the basis of the car is zero due to depreciation, then the entire sale price (up to depreciation claimed) is ordinary income.

[solomon]

It would be nice in the TTB DID YOU KNOW'S to see some authoritative cite.

[Black Bart]

Well, that'd be okay except

It would be nice in the TTB DID YOU KNOW'S to see some authoritative cite.

they've probably already pulled all those cites together and distilled them down to get the condensed version into TTB, which is what we want their book for instead of havin' to shovel through all the tech tomes. Too, with what I can only imagine is an incredibly daunting task of keeping TTB current, I doubt they've got the time to pull up for our inspection every one of a probable multitude of sources which might be the ingredients in their final, abridged how-to/what-to-do instruction about a particular question.

Besides, you probably wouldn't want to get in a cite fight with him. I once saw him argue authoritatively for pages and pages and pages with another poster here about...umm...vacation houses, I think it was. That boy can cite your britches off and slap you verbally with law and regulations 'til the cows come home. I'll bet most boarders here would agree -- if he says it; it's so.

[solomon]

I'll bet most boarders here would agree -- if he says it; it's so

I understand and would be one of them. Nevertheless, with this particular post I have hunted for some authority in case needed on audit and can't find anything. I am sure it exists somewhere or it would not be in the TTB.

[Bird Legs]

How About

Googling for it. Never know what you will find that way. Maybe you have already done that.
Also go to this website: taxsites.com Then click on federal.
This may help you in locating something.
Good L:uck

[Black Bart]

The Bird is the Word

Whatcha doin', tweeter? Anything exciting going on inside the Austin city limits nowadays?

[Bees Knees]

IRS Pub 463, page 25, “Depreciation adjustment when you used the standard mileage rate. If you used the standard mileage rate for the business use of your car, depreciation was included in that rate. The rate of depreciation that was allowed in the standard mileage rate is shown in the chart that follows. You must reduce your basis in your car (but not below zero) by the amount of this depreciation.”

[Bees Knees]

If basis cannot go below zero, per the Pub cited, then the depreciation component of the standard mileage rate once basis is reduced to zero is meaningless. The old rule where there was a lower standard mileage rate once you hit a certain mileage limit for the year hasn't been around for decades. 1989 was the last year the standard mileage rate had two rates. One for up to 15,000 miles, and a second lower rate (without depreciation) for all excess miles.

Thus, the depreciation component of the standard mileage rate can only reduce basis to zero. Nothing more.

[Bird Legs]

Black Bart

Austin City Limits was a huge success this year. It did not rain during the festival. Got a little warm is all. Of course the festival is only 3 days. However, the different bands will
play at the different clubs for a week or two.
There were about 134 bands from around the world.
This last weekend we had the old Pecan Street festival. Arts, crafts, food & music for 2 days. This covered about 20 blocks downtown Austin.
Hope things are going well for you. Is that "still" still operating out in the boondocks?
What do you use to haul the finished products in? SUV, Humvee, horse & buggy?