New Business Vehicle Purchase with Personal Vehicle Trade in, down payment and loan Entry Question

ROMO2 · ‎February 13, 2024

Hi

I use Quickbooks Pro 2022 Desktop and trying to figure how to manage this transaction:

Purchased a new Vehicle end of December 2023 to use the Sec 179 Rule however traded a Personal Vehicle I had "leased" to the business previously. It is a S Corp.

I traded the personal vehicle + Business Down payment of $5,000, and financed the balance.

Not sure if I ignore the personal vehicle part of transaction and how everything will be accounted as I depreciated it personally against income from lease to business.

1. I set up a Vehicle Asset Account

2. I set up a Long Term Liabilities Vehicle Loan Account

BigRedConsulting · ‎April 14, 2024

If you leased a personal vehicle to the business, it basically rented the vehicle, then once the lease is over it's back to being your personal vehicle.

So, I think the $5000 value is a personal down payment on a new business vehicle, which is an owner's equity investment. So, if you entered the $5000 down in the vehicle asset account, it should use an equity account.

Rainflurry · ‎April 15, 2024

@ROMO2

Obviously, you will want to run this by your CPA/tax accountant. Are you 100% owner of the S-Corp? You should be aware that Section 179 deductions reduce shareholder basis.

Let's assume the new vehicle cost of $50K, the personal vehicle trade was valued at $20K, the business paid $5K in cash, and the remainder ($25K) was financed. The trade-in value is your shareholder contribution and the amount you will use to determine any gain on your personal return. The journal entry for the business looks like this:

	Debit	Credit
New vehicle (fixed asset)	50,000
Cash (down payment)		5,000
Shareholder Contribution (equity)		20,000
Loan payable (liability)		25,000

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