Pete asks the following question about his car:
Q: If I take a company owned and fully depreciated car and give it to myself personally are there tax consequences when I sell it?
A: Yes, most definitely. When you sell the car, you will have to recognize ordinary income for the full sales price of the car. The concept here is basis. You get basis in an asset when you buy it or add to it. In the case of a car, your basis typically is the full price you paid for it, including sales tax unless you took the sales tax as a separate deduction.
As you depreciate the car, the depreciation reduces your basis. So, if you fully depreciate the car, your basis is zero.
When you sell an asset, gain or loss is determined by the difference between your selling price and your basis. Since your basis is zero, the entire selling price is gain. You don't get to take capital gain on the sale because of the depreciation. This is called "recapture." Any portion of the sale that relates to the depreciation you took before is recaptured as ordinary income and taxed at your ordinary income rates.
For more about how to treat your car and other vehicles, see our course called "Maximizing Deductions of Your Dream Vehicle." You can find it along with our other tax strategy courses at http://www.wealthstrategyuproducts.com/Tax.html.
Warmest regards,
Tom
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