When David sold the car he had used in his business for the past few years, he needed to adjust his basis to reflect the depreciation he had taken on the car over the years. Given that David had always used the standard mileage method, what would be the first step for him to calculate his depreciation?

When David used the standard mileage rate to deduct automobile expenses for a car used in his business, the rate already includes an amount for depreciation. Each year, the IRS sets the standard mileage rate, and part of this rate is designated for depreciation. To calculate the depreciation included in the standard mileage rate, David would need to: 1. Determine the total number of business miles driven each year for the years he used the standard mileage rate. 2. Multiply those miles by the depreciation portion of the standard mileage rate for each respective year. The IRS provides the depreciation component of the standard mileage rate annually. 3. Sum the depreciation amounts for all the years the car was used in the business to find the total depreciation. Once David has calculated the total depreciation, he would subtract this amount from the original basis of the car to determine the adjusted basis. The adjusted basis is what he would use to calculate any gain or loss on the sale of the car for tax purposes. For example, if the IRS's depreciation portion of the standard mileage rate was 25 cents per mile for a given year, and David drove 10,000 business miles that year, the depreciation deduction for that year would be 10,000 miles x $0.25/mile = $2,500. It's important to note that the standard mileage rate changes each year, so David would need to use the correct rate for each year he claimed the deduction.

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