Kim owns a truck that cost $35,000 several years ago. After using it personally for two years, she converts the truck to business use when the truck's fair market value is $20,000. She uses the truck in her business and appropriately deducts $5,000 in depreciation. Then, she sells the truck for $42,000. What is Kim's recognized gain or loss on the sale?

Question

Quizplus · Accepted Answer

Kim's basis in the truck is $20,000 (the fair market value when she converted it to business use). She deducted $5,000 in depreciation, which reduces her basis to $15,000. When she sells the truck for $42,000, she has a gain of $27,000 ($42,000 - $15,000).

Kim Owns a Truck That Cost $35,000 Several Years Ago