Standard Mileage Depreciation Recapture in Car & Truck Worksheet

[jw-rogers]

Taxpayer has an auto used roughly 90 percent in business. He purchases originally for $20k.

He has used since 2017 and the standard mileage rate has always been used. 

Vehicle is disposed in 2019 for $5k.

Standard mileage recapture is $8k.

Where is this input on the car and truck worksheet? 

[jw-rogers]

I went ahead and input on 4797 page 2 with a couple of overrides -  

[Terry53029]

If you scroll down on the auto asset worksheet you will see where to fill in sale price and date of sale. Be sure you only put business use of sale price (you said 90% or $4500). The 4797 will be filled out by program, and no over rides needed

[TaxGuyBill]

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@jw-rogers wrote:

 90 percent in business

Vehicle is disposed in 2019 for $5k.

Standard mileage recapture is $8k.

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Just to clarify, the recapture will only be $4500-ish.  The recapture is limited to the gain, and at 90% that is about $4500-ish.

As you found out, ProSeries is not set up for this.  (1) It doesn't properly calcuate things when the businness percentage varies from year to year, and (2) it doesn't really do anything with the depreciation component of the Standard Mileage Rate.  So you need to either (a) use overrides, (b) use the "Enterable" 4797 or (c) invent numbers on the Asset Entry Worksheet to get the proper amounts.

[jw-rogers]

@TaxGuyBill 

On 4797 p2, for lines 20 to 24 - If I enter sales price (oye which I found out was $9.5k). Cost was $15k.

Sum of recapture depreciation was $9494.

Adjusted basis is $5,506, gain of $3994.

I'm looking now but how can I tell if the software is limiting the depreciation recapture to the gain?

How many people do you think recapture the standard mileage taken on asset disposal....

[TaxGuyBill]

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@jw-rogers wrote:

@TaxGuyBill 

On 4797 p2, for lines 20 to 24 - If I enter sales price (oye which I found out was $9.5k). Cost was $15k.

Sum of recapture depreciation was $9494.

Adjusted basis is $5,506, gain of $3994.

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At 90% (if that is the exact average percentage), the business sales price is $8550 (Line 20).

The unadjusted business Basis is $13,500 (Line 21).  Then you subtract the depreciation of $9494 (Line 22) and get an Adjusted Business Basis of $4006 (Line 23).

So the total business gain would be $4544 (Line 24), all of which is depreciation recapture.  So as long as the 4797 only shows the gain of $4544 (again, based on exactly 90% business use), you are good to go.

[jw-rogers]

@TaxGuyBill 

Last question...taxpayer used the vehicle different percentages in different years, ranging from 50 to 90 percent. 

What is the best approach for the business use percentage? I was thinking I'd add up all of the years personal vs business and use the total percentage.

[TaxGuyBill · Accepted solution]

Yep, add up miles from all of the years to get a long-term business percentage.

Assuming it is still a gain, you should be good to go.

In the event it were to show a loss, then you need to find out if it was business use immediately after purchase, or if it was converted from personal use.  If it was converted from personal use (and those original numbers we went through shows a LOSS), then you have some more calculating to do.

[dkh]

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@jw-rogers wrote:

How many people do you think recapture the standard mileage taken on asset disposal....

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     At least two - @jw-rogers  and @TaxGuyBill   beyond that very few.