Jim, a long-time client of yours, recently sold a few assets from his business.
ID: 2556963 • Letter: J
Question
Jim, a long-time client of yours, recently sold a few assets from his business. He brings the following information to you hoping you can help him make heads or tails of it:
He sold an old pickup truck for $9,888 cash.
He originally purchased the truck 10 years ago for $30,900. Since then, he has performed normal maintenance on it.
At one point, he had to replace the truck's transmission for an additional $3,589. (Because you knew about this, you have properly recorded depreciation on the truck for a total of $32,000 before the sale.)
How would this be taxed under 2017 IRS tax law if a gain? if not a gain what is the loss?
Explanation / Answer
Cost of the truck = $30900
Add: Replacement done = $ 3589
Total cost of the Truck = $34489
Depreciation claimed till now = $32000
Net cost of the truck now = $34489 - $32000 = $2489
Long term capital gain = $9888 - $2489 = $7399
This Long term capital gain of $ 7399 would be taxed at 0%, 15% or 20% depending on the Tax bracket applicable to Jim.
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