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estimating the cost basis of a car used for business one year after purchase

Hi everyone,

I am trying to enter the depreciation numbers of a business car in Turbotax. I made the following attempt to estimate the cost or other basis (Form 4562, Part V, line 26, Column d) of the car.

The purchase price of the car was $20,000. The car was purchased in Jan 2010, was 4 years old, and was used for my personal purposes for about one year. Using data from Edmunds.com, I estimated the depreciation from Jan 2010 to Jan 2011 (when I started using the car for business) to be $2,735. Would this estimation be considered to be accurate enough? Is there a conventional method to determine the cost or other basis?

Thanks for your help

Reply to
elodie
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Your starting point for depreciation is the lesser of the purchase price of the car or its fair market value on the day you converted it to business use. The FMV on the date business use began is almost certainly less than what you paid for it. What depreciation might have been during the period of personal use is irrelevant to this process.

Reply to
Bill Brown

Considering the Section 280F limitation on vehicle depreciation, is this really a problem (a single year considered)? I only see this as a problem if/when taken across several years.

Reply to
D. Stussy

Edmunds.com provides value information, not depreciation for tax purposes. Their data implies that the value decreased by $2,735 from Jan 2010 to Jan 2011, so estimating FMV on that latter date as purchase price minus $2,735 seems reasonable.

Seth

Reply to
Seth

True. Other online sites can provide specific estimates of retail, wholesale and private party transaction values.

However, the first year of depreciation (or cost recovery as the IRC calls it) will be 2011, the year business use began, with no adjustment for what-would-have-been 2010 as the OP seemed to believe. An important point, again, is basis is going to be FMV on the date placed in service (or acquisition cost if lower), NOT acquisition cost less what 2010 depreciation would have been.

Reply to
Bill Brown

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