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?



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?

  • Is the company car titled to you? How did you enter this transaction in turbo tax? – littleadv Mar 24 '14 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 '14 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 '14 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 '14 at 8:42
  • Of course you should say "No". You didn't trade your car in, you sold it. – littleadv Mar 24 '14 at 21:14

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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