CERTIFIED PUBLICACCOUNTANTHow do trade in abusiness car?Here are the new rulesNew tax legislation elimi- Su Brown, CPAnated the tax deferral onexchanges of like-kind exchanges of propertyexcept for real estate. This change (generally effective in2018) may apply to more transactions than you think. Forinstance, it comes into play wen you trade in one businescar for anotherHere's what matters for business vehiclesUnder prior law, no curren tax was due on an exchange oflike-kind properties, like vchicles, if certain requirementswere met. You only had to pay tax on any "boot" you received (c.g., cash on a car trade-in). But now taxpaycrs mustcontend with a convoluted set of rules that could result in ataxable gain.Let's look at an example involving a trade-in before and afterthe new lawBefore the new law: You bought a truck for your business for $50,000 that has been fully depreciated. So your"basis" for computing any gain or loss is zero.If you trade inthe truck for a new one costing $55,000 and give the dealer$30,000 in cash, no current tax is duc on the like-kind exchange. Your adjusted basis equals your basis plus any addional amount you pay. As a result. your adjusted basis goinforward is $30,000. (Basis of old $0 + cash paid $30,000 =$30,000 basis of new). After the new law: Assume the same scenario above.Although you're eligible to claim favorable depreciation de-ductions for the vehicle, especially in the first year of ownership. your adjusted basis under the new rules is $55,000Therefore, you must report a $25,000 taxable gain. (Basisof old $0 + trade-in value $25,000 $25,000 gain on old)There are other tax complications, but you get the basic idea.Keep these new rules in mind when you negotiate the priceof a new business vehicle and the trade-in valuc of vour oldonc. Alternatively, you might sell the vehicle personally andpay the full price for a new one. Call for help in determiningyour best approach.Su Brown & Associates, PLLC77 Southway Suite BLewiston, ID 8350i. 208 743-7790sbassoc@subrown.com

Date: January 10, 2019

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CERTIFIED PUBLICACCOUNTANT How do trade in a business car? Here are the new rules New tax legislation elimi- Su Brown, CPA nated the tax deferral on exchanges of like-kind exchanges of property except for real estate. This change (generally effective in 2018) may apply to more transactions than you think. For instance, it comes into play wen you trade in one busines car for another Here's what matters for business vehicles Under prior law, no curren tax was due on an exchange of like-kind properties, like vchicles, if certain requirements were met. You only had to pay tax on any "boot" you re ceived (c.g., cash on a car trade-in). But now taxpaycrs must contend with a convoluted set of rules that could result in a taxable gain. Let's look at an example involving a trade-in before and after the new law Before the new law: You bought a truck for your busi ness for $50,000 that has been fully depreciated. So your "basis" for computing any gain or loss is zero.If you trade in the truck for a new one costing $55,000 and give the dealer $30,000 in cash, no current tax is duc on the like-kind ex change. Your adjusted basis equals your basis plus any addi onal amount you pay. As a result. your adjusted basis goin forward is $30,000. (Basis of old $0 + cash paid $30,000 = $30,000 basis of new) . After the new law: Assume the same scenario above. Although you're eligible to claim favorable depreciation de- ductions for the vehicle, especially in the first year of own ership. your adjusted basis under the new rules is $55,000 Therefore, you must report a $25,000 taxable gain. (Basis of old $0 + trade-in value $25,000 $25,000 gain on old) There are other tax complications, but you get the basic idea. Keep these new rules in mind when you negotiate the price of a new business vehicle and the trade-in valuc of vour old onc. Alternatively, you might sell the vehicle personally and pay the full price for a new one. Call for help in determining your best approach. Su Brown & Associates, PLLC 77 Southway Suite B Lewiston, ID 8350i. 208 743-7790 sbassoc@subrown.com

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