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How do I report the disposition of a business vehicle totaled in an accident?

david3
Level 7

The disposition instructions for a business vehicle that was totaled say not to report the disposition on the vehicle asset sheet but to report it on the casualty theft form. The TP incurred a gain due to depreciation deductions. 

After completing the business section of the casualty theft form, the full gain is considered long term. I can't find where to indicate the amount of depreciation to be taxed at the ordinary tax rate. 

How do I properly report the gain so that the depreciation portion is taxed correctly? 

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5 Replies 5
Camp1040
Level 8

When you arrived at adjusted basis that should take care of accumulated depreciation taxation.

david3
Level 7

Thank you for your help.

When entering the adjusted basis on Form 4684 there is nowhere to enter depreciation so the full gain is reported as long term on line 33.

I figured it out. The disposal has to be entered on the enterable 4797 p 2 and the depreciation flows to 4797 line 13 ordinary gain. If there is any additional gain then that portion flows to F 4684 line 33 long term gain.

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Camp1040
Level 8

Having never  filed a business casualty loss for a client and not wanting to beat a dead horse I do have a question.

By definition, adjusted basis would include original cost plus improvements, minus depreciation and Casualty losses Plus any reimbursement and the net should be casualty loss or gain.

You may be filing additional forms or taking extra steps that are needed.

Please note, this is from the point of view of a preparer not experienced with form 4684.

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david3
Level 7

Thanks for your input. I, also, have never filed a business casualty loss.

Yes, F 4684 allows you to enter the adjusted basis. However, nowhere does it allow you to enter depreciation separately so that that portion of the gain is taxed at the ordinary rate.

From the PS instructions on reporting the disposal of a business asset involved in a casualty where there is a gain, it appears that you enter the information on the enterable 4797 and not F 4684. If there is a loss, then you enter the disposal on F 4684.

Since this is my first business asset casualty disposal, I was hoping someone who had done one would be able to confirm my understanding or offer a better way to report the disposal.

Thank you.

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Camp1040
Level 8

There are quite a few smart Champs / All-Stars on this site, someone brighter than I will chime in and confirm your process. Good luck