Tax Guru – Ker$tetter Letter

Q:

I bought a 2004 Chev Suburban loaded to the max in December 2003, took a huge section 179 writeoff, 100 pc.  We can call that purchase price ‘X’.
Unfortunately I have had to file Chapter 13 and the truck will be turned in this year (2005), probably
being sold at auction in the 20s…you say on tax guru the following
‘If you sell the previously deducted vehicles, you need to report the sales on Form 4797 and show
anything that you get for it above its depreciated book value as depreciation recapture ordinary income.
 A sale only makes sense tax wise if the price you can get for it is less than the adjusted depreciated book value, so that you can claim the loss on Form 4797.’
I think I sound safe but and way you can clarify would be greatly appreciated…

 A:

From what you have said, you will need to report the sale of the Suburban on your 2005 1040 via Form 4797.  If you did write off its total cost on your 2003 1040, its book value is zero; which means that whatever you receive for it is taxable recapture gain. 

If you are in bad enough financial shape that you had to file for bankruptcy protection, odds are that you have other losses that will more than offset the 4797 gain; which will make the actual tax hit on the disposal of the Suburban zero.

I’m sorry I can’t be of more assistance.  Good luck.

Kerry Kerstetter