Hello,
I have a Toyota Tundra at a local dealership for a safety recall for frame rust and rot. My question is: if Toyota buys the vehicle back rather than repair it, is this considered income when I file my 2010 taxes? If so, how will affect my adjusted gross income? I live in Rhode Island. Thank you for your time.

I don't see any reason why you would have to pay tax on it since its more of a reimbursement for something you already paid for and most used after tax money or a loan to buy it. That my opinion.

No, it is not income. You are selling your personal property.

It would only be income if the amount they pay you is greater than your original cost of the vehicle (including taxes and fees) - which seems highly unlikely. But in that case you'd have a capital gain to report on schedule D.

Thank you for your replies. This is very helpful.