Fixed Asset Manager - personal property trade (tax vs book)

[Hub]

Using the Fixed Asset Manager when a client trades in a vehicle for another vehicle how do we get the program to treat the federal side as a sale (since the tax code no longer recognizes trades on personal property) when the accounting side (Book) would still qualify as a trade under GAAP. How do we get both correct results in the FA Manager screen?

[dd4vols · Accepted solution]

I'm assuming that you have "book" as one of your basis choices.  If so, then when you go to the disposal tab, put the remaining book value in as the sale price in that basis column.  That way, there is NO gain or loss...and the BV of course gets added to the new asset.   More often than not, you Tax asset value is different form your Book asset value,

[dascpa]

The above answer is incorrect.  Effective 2018 like-kind exchanges of personal property no longer qualify, therefore the concept of trade-in deferral no longer exists (horrible on vehicles) therefore it is treated as a sale of the old and purchase of the new.  See below.

IR-2018-227, November 19, 2018

WASHINGTON — The Internal Revenue Service today reminded taxpayers that like-kind exchange tax treatment is now generally limited to exchanges of real property. The Tax Cuts and Jobs Act, passed in December 2017, made tax law changes that will affect virtually every business and individual in 2018 and the years ahead. 

Effective Jan. 1, 2018, exchanges of personal or intangible property such as machinery, equipment, vehicles, artwork, collectibles, patents, and other intellectual property generally do not qualify for nonrecognition of gain or loss as like-kind exchanges. However, certain exchanges of mutual ditch, reservoir or irrigation stock are still eligible.

Like-kind exchange treatment now applies only to exchanges of real property that is held for use in a trade or business or for investment. Real property, also called real estate, includes land and generally anything built on or attached to it. An exchange of real property held primarily for sale still does not qualify as a like-kind exchange.

A transition rule in the new law allows like-kind treatment for some exchanges of personal or intangible property. If the taxpayer disposed of the personal or intangible property on or before Dec. 31, 2017, or received replacement property on or before that date, the exchange may qualify for like-kind exchange treatment.

[TaxGuyBill]

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@dascpa wrote:

The above answer is incorrect.  Effective 2018 like-kind exchanges of personal property no longer qualify, therefore the concept of trade-in deferral no longer exists (horrible on vehicles) therefore it is treated as a sale of the old and purchase of the new. 

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The question and answer were dealing with the STATE, which apparently still does allow it.

[Hub]

I am well aware of the fact that the trade-in for federal is nonexistent since 2018 but the rules for GAAP have not changed and when using FA Manager you have multiple columns for federal, AMT, ACE, Book, State etc.  The issue is when using the screen if you dispose of the asset through a trade in the answer really is that for federal the trade in is a sale, but for book it is not and you really have to jump through hoops in FA Manager to get it to not report the book as a sale.

The issue is with the FA Manager and how to get both results in one screen which apparently can not be accomplished, so the answer above on inputting the sales price for "book" at the remaining book value should work.  

Tax basis is almost always different than GAAP on this issues.

Thanks for the posts