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Individual selling a depreciated light commercial vehicle - treatment of loss or gain

Newbie

Views 1149

Replies 6

This is the background:

  • An individual (not sole trader) owns a light commercial vehicle; he is a carpenter
  • The vehicle percentage for business use is established via logbook over a 12 week period (for the purpose of this question, say 75%)
  • The business % of costs is claimed as a work expense in the tax return
  • The business % of depreciation is also claimed in the tax return
  • For the purposes of the situations below, the vehicle's depreciated value is $8,000.

 

Situation 1: The light commercial vehicle is sold for $10,000, which is $2,000 greater than the depreciated value

  • How is the difference treated in the tax return?

Situation 2: The light commercial vehicle is sold $5,000, which is $3,000 less than the depreciated value

  • How is the difference treated in the tax return?

 

Thank you.

1 ACCEPTED SOLUTION

Accepted Solutions

Most helpful response

Taxicorn

Replies 3

@JeremyB 

 

(termination value  -  adjustable value at sale)  x  taxable %

 

($10,000 - $8,000) x 75% = $1,500 assesible income declared at item 24 cat 1

 

($5,000 - $8,000) x 75% = -$2,250 deduction.

 

 

6 REPLIES 6

Taxicorn

Replies 5

@JeremyB 

 

How much has been claimed in depreciation when it was sold?

 

Newbie

Replies 4

For the purposes of this example, the vehicle was purchased for $15,000, the depreciated value is currently $8,000, so depreciation is $7,000.

$7,000 x 75% would have been depreciated over multiple years by the time the vehicle is sold.

Most helpful response

Taxicorn

Replies 3

@JeremyB 

 

(termination value  -  adjustable value at sale)  x  taxable %

 

($10,000 - $8,000) x 75% = $1,500 assesible income declared at item 24 cat 1

 

($5,000 - $8,000) x 75% = -$2,250 deduction.

 

 

Newbie

Replies 2

Thank you.

Is the -$2,250 deduction placed in the ‘work-related expenses’ section?

Taxicorn

Replies 1

@JeremyB 

 

It will form part of your depreciation that you claim that year.

 

Newbie

Replies 0

@macfanboy thank you for your help.