[NEVERHOME247]

Frank,I bought a new truck this year. Probably my first mistake. But anyway, I kept my old truck and tried putting a driver in it. Things did not work out and I ended up giving the old truck back to the bank.
However my accountant depreciated that unit on my taxes the last 2 years. Is that going to have any impact on this years tax return? Since it went back to the bank. Thanks

[Fkatz]

By the way, Happy New Year,

Sorry for the delay in replying to you question, Since the holidays were upon us and I am still waiting for an indepth explanation of what your situation is with the voluntary reposession of your orginal truck, but according to the information that I have received so far.

According to the 2002 federal tax handbook the law explains this under Cancellation of Debt Paragraph 1402-1411, can be view on the web. I am not sure of the tax web site, but according to PP 1403, cancellation of debt by a bank or anyother financial institution is considered income. if the bank sends a 1099-C for that cancellation it is considered personal income, as far as a business, reference #

this is a Quote:
page 127 in RIA Federal Tax Handbook P1410:
A solvent taxpayer other than a C Corporation whose "Qualified real property business indebtedness"QRPBI" is discharged (outside of bankruptcy) can elect to exclude the discharged amount from income, to the extent of the excess (if any) of (1) the outstanging principal amount of the QRPBI immediately before the discharge over The (2) Fair market value (FMV)(At discharge) oof the property securing the QRPBI less the outstanding principal amount of any other QRPBI secured by the property at that time. Code. Sec 108(a)(1)(D).Code Sec 108(c)(2)A, you can find them in the Tax code under Tax regulation# 1-108-5, 1-108-6, 1-108.6(A, these are at www.RIAHOME.COM ,
QRBI IS INDEBTEDNESS(OTHER THAN fAM) INCURRED OR ASSUMED BY TAXPAYER IN CONNECTION WITH REAL PROPERTY USED IN A TRADE OR BUSINESS AND SECURED BY THAT REAL PROPERTY.
IF INCURRED AOR ASSUMED BY THE TAXPAYER AFTER '92 IS "QUALIFIED ACQUISITION INDEBTEDNESS"
TAXPAYER ELECTS TO TREAT AS "QUALIFIED REAL PROPERTY BUSINESS INDEBTEDNESS ON fORM 982 ATTACHED TO THE RETURN FOR THE TAX YEAR OF DISCHARGE. CODE SEC. 108(d)(9)(a)1-108(c)(4), 1-108(c)(2)
THE AMOUNT MAY BE EXCLUDED UNDER THIS rules is limited to the excess(if any) of (1) the outstanding principal amount of the QRPBE imediately before the discharge, over the difference between the FMV at the time of discharge, of the real property and the (B) outstanding principal balance of the indebtedness.

YOU WILL HAVE TO RECAPTURE THE DEPRECIATION YOU TOOK OVER THE LAST 2 YEARS. YOU 0LY HAVE TO PAY THE TAX ON THE DIFFERENCE BETWEEN

RETAIL PRICE PAID(bASIS
FAIR MARKET VALUE AT TIME OF VOLUNTARY REPOSSESION NOT THE BAL OF THE LOAN
BALANCE PLUS THE DEPRECIATION IF MORE THAN 50% WAS DEPRECIATED IT IS TAXABLE, IF UNDER 50% ITS NOT, THAT IS IF WAS LISTED UNDER LISTED PROPERTY ON THE 4562 DEPRECIATION FORM ORGINALLY. OTHERWISE THE FULL AMOUNT WITH THE RECAPTURE OF DEPRECIATION IS TAXABLE.
fRANK