Below, learn how the regulations in tax code Section 1031 apply to selling or exchanging a business vehicle. Note that these rules were different before the Tax Code a

When replacing a business vehicle prior to 2018, it made a difference for tax purposes if it was sold or traded-in for the replacement vehicle.  If the vehicle was sold, the result was reported on a taxpayer’s return as an above-the-line gain or loss.  Since trade-ins were treated as a Section 1031 exchange, any gain or loss was absorbed into the replacement vehicle’s depreciable basis.  Thus, it was generally better to trade in a vehicle that would result in a gain if it were sold and sell a vehicle if the disposition of it would result in a loss. This is no longer true since Section 1031 only applies to real estate after 2017; every business vehicle disposition will now be a Form 4797 reportable transaction regardless of gain or loss.