Auto trade in - confused myself

[thomtax]

I've read the pages in TTB about 2 methods of figuring auto trade in and have calculated accordingly. However, I have another question that I cannot find addressed.

If the client wants to, can he handle the old vehicle as being sold for the amount of the trade in - it is a loss using the basis less depreciation. And then start the depreciation on the new vehicle at the total purchase price.

LT

[solomon]

If it is a 1031, then it can not be treated as a sale.

[Bees Knees]

agreed....

You do not have a choice.

TTB, page 6-14 says:

Mandatory. The like-kind exchange rules are mandatory. A taxpayer
who sells property and buys similar property in two mutually
dependent transactions, may have to treat the sale and
purchase as a single nontaxable exchange unless the transactions
are structured to avoid the like-kind exchange rules.

[thomtax]

Thanks - this was the conclusion that I came to but thought that maybe I was overlooking something. It would have been to their benefit if it could be otherwise.

Thanks again.
LT

[thomtax]

You do not have a choice.

TTB, page 6-14 says:

Bees - I have the TTB (separate business and 1040) and my page 6-14 is just about all about installment sales. Am I completely lost or is it possibly on a different page?

Thanks for your help.
LT

[RLymanC]

Sale of Business Auto

You can elect out of the 1031 exchange rule by attaching a statement indicating that you elect out under Reg. 1.168(i)-6(i) for each property.

[Bees Knees]

Bees - I have the TTB (separate business and 1040) and my page 6-14 is just about all about installment sales. Am I completely lost or is it possibly on a different page?

Sorry, the correct page reference is 6-17, second column.

[Bees Knees]

You can elect out of the 1031 exchange rule by attaching a statement indicating that you elect out under Reg. 1.168(i)-6(i) for each property.

It’s not an election out of the like kind exchange rules. Those rules are mandatory. Reg. Section 1.168(i)-6(i) is an election for depreciation purposes only to treat the trade-in as a tax-free disposition of the old car and purchase of a new car, using the adjusted basis of the old car as if it were used 100% for business, plus boot paid for the new car.

That is still a like kind exchange. If it were an election out of the 1031 exchange rules, you would be required to pay tax on the trade in.