I have a 2010 Chevy Silverado vehicle that we received $21,000 for on trade-in for a 2012 Chevy Silverado vehicle that was purchased for $17,000, and we received $4,000 back in cash on the purchase of the new vehicle. The 2010 vehicle was Sec. 179'd at a cost of $33,000 back in 2010 using the tax basis on the financials, so it's book value was -0-. The entity is an S-Corp. that needs to report the sale on a K-1 to its shareholder since it was Sec. 179'd and may need recapturing, so the gain does not hit income of the tax return, but get's passed through on the K-1. Do I record only the boot ($4,000) as the gain on both the financials and tax return and not record the 2012 vehicle on the books since the gain on the 2010 vehicle ($21,000) is greater than the cost of the new vehicle ($17,000)?

If the book value of the vehicle traded in is -0-, but you received an asset worth 17,000 and cash back of 4,000, then remove the old vehicle -0-, record the new one at 17,000 and record a gain of 4,000.