Vehicle Sale Gain Calculation Correct?

[David]

Business purchased a truck in 2006 and used it 100% for business from 2006 - 2010. Business use dropped to 77% in 2011 and 76% in 2012.

Purchase price was $28,900 and the TP took $28,600 depreciation through the years. This was mostly driven by sec 179 + 100 business use. No depreciation was taken in 2011 and 2012 since business use dropped to 77% and 76%.

The truck was sold for $6K. The program is calculating a gain for $11,100.

The reason why is because it is giving credit for only the 76% business use in 2012. The cost basis at 76% is only $22K. The gain is calculated by taking 76% of the $6K sell price plus the difference between the depreciation taken of $28,600 less the revised cost basis of $22K.

Is the calculation correct? Shouldn't the gain be based on a prorated business use through the years, thereby giving the TP credit for those years of 100% business use?

Thanks.

[Guest Taxed]

Just doing a quick calculation I am coming up with a gain of $5700!

[David]

Yes, that's what I thought. But it seems as though the program is adding the excess of depreciation taken over the 76% business use portion of the original purchase price.

I am leery of changing a calculation made by the program. When the business use drops in latter years does the difference between the amount of depreciation taken vs. the last business use percent of purchase price get added to the gain?

If the program is not calculating this correctly, how do I change it?

Thanks.

[Guest Taxed]

Time to review pub 946 (Depreciation)! I know there is recapture of depreciation if it falls below 50%.

Did you run the depreciation schedules and see what is happening?