tax ramifications of trading-in
I've been trying to get the answer to this for months. Sure would appreciate some help.
In August, 2004 I purchase a 2004 Chevy Suburban for business use and depreciated the entire ~$48,000 cost under sec. 179 that year.
It's now 3.5 years later and I'd like to know the tax ramifications of trading in the 2004 Suburban for a 2008 Suburban (cost ~$54,000).
I understand that right now the cost basis of the 2004 chevy is $0.
Given that taxes and depreciation are not my strong suit, can you explain what the tax consequences are for such a transaction?
Specifically, how much of the new vehicle will be available to depreciate, and can it be depreciated all in a single year (2008)? With that information, I can understand the real (net) cost (that is, for example, if the trade-in value of the 2004 chevy is $30,000, leaving me paying $24,000 in cash for the new 2008, but I can depreciate all of that, then my post-tax dollars cost will be somewhere in the $14,000 range (40% taxes) -- do I understand this correctly)?