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  Dear
Tax Talk,
I purchased an automobile for $26,000. It
ended up being a lemon. The down payment and the advanced payments
I made on the loan total over $4,000. I ended up getting very
frustrated and had the dealer buy back the car for what I owed
on it, which was $17,000. I feel fine paying for the time that
I used the car, but I lost quite a bit of money on the whole
deal. Can I write this loss off on my taxes?
-- Pedro
 Dear
Pedro,
It sounds like a pretty expensive lemon. In order for most
losses to be deductible, they have to be incurred in a transaction
entered into for profit. One notable exception would be a
casualty
loss, but that relates to losses as a result of theft
or storm and would not apply to the car.
If you purchased the car to use in your business,
then the loss could be written off as a business loss. If
you're an employee that uses your car in business, for example
to make sales calls, then you could also write off the loss
as a business loss. Business losses would be claimed on Form
4797.
But if the car was solely intended as personal
use, unfortunately personal losses cannot be written off.
For example, you can not write off the loss in value of a
car from when you purchased it until the time you sold it.
Most states have lemon
laws that should afford you some recourse against the
dealer or manufacturer. Seeking recourse against the dealer
or manufacturer is probably better than a tax write-off.
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