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Last year, I started a new job which afforded me the convenience of a company car. When receiving this car, we sold our personal vehicle to the dealership when we picked up the company car.

My tax program (TurboTax Deluxe) is telling me I need to fill out a like-kind exchange form. Have I done something wrong? How do I get around this?

Thanks

UPDATE

The piece where I was prompted for use of vehicle as business activity was on the page where it asks:

"Did you Trade-In your CHEVROLET TRAVERSE for Another Vehicle?"

I have two options:

  • Yes, I traded in my TRAVERSE and started using a new vehicle for business right after I bought it.
  • No, I didn't trade in my TRAVERSE for another vehicle or didn't use it immediately therafter for business.

I assumed, 'Yes', since I started using a company car. Would I say 'No' for this step?

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Is the company car titled to you? How did you enter this transaction in turbo tax? –  littleadv Mar 24 at 8:36
    
The car is not titled to me, but my company. From what I heard from my company, 'the vehicle is akin to an assigned uniform' - ie: i do not pay taxes on it and so forth –  Barry Chapman Mar 24 at 8:40
    
I entered the transaction as sold business assets for 2013, since I used it primarily for business - and then sold it. –  Barry Chapman Mar 24 at 8:41
    
For like kind exchange you need to exchange an asset. Since you didn't buy a new car - how come turbotax thinks you did? You must have entered something wrong. –  littleadv Mar 24 at 8:42
    
Of course you should say "No". You didn't trade your car in, you sold it. –  littleadv Mar 24 at 21:14
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1 Answer 1

up vote 6 down vote accepted

You cannot do a like-kind (Sec. 1031) exchange for personal property, only for business/investment property. Since you said that you traded in your personal car - no like-kind exchange is possible.

Also, since the new car doesn't belong to you - you didn't actually perform any exchange. You sold your old car, but you didn't buy a new one.

If Turbo-Tax suggests you to fill the exchange form - you must have entered something wrong to make it think there was an exchange. Check your entries again, specifically - check if you entered that you purchased a new car instead of the old one, since you didn't. See an example of where to start looking here.

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Thank you - this helps a lot. –  Barry Chapman Mar 24 at 9:08
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