The calculations can seem complicated, but here's an example of how it works.
Let's say you bought a new truck (not subject to the "luxury auto" limitations) in January 2010 for $100,000. And suppose the truck is five-year MACRS property (modified accelerated cost recovery system), you use the mid-year convention and, in 2011, you trade in the old truck on a new and better truck. In addition to the trade-in, you pay $50,000 cash for the new truck.
For 2010, if you claimed 50-percent bonus depreciation, your total depreciation deduction on the old truck would have been $60,000 (50 percent of $100,000, plus a first-year MACRS deduction of .20 times the remaining $50,000).
For 2011, your MACRS deduction on the old truck is $8,000 ($50,000 MACRS cost times .32 second-year MACRS factor times ½-year MACRS convention in the year of disposition).
Your tax basis in the new truck is $82,000 [$50,000 cash, plus remaining tax basis in the truck traded in of $32,000 ($100,000 less $50,000 bonus depreciation, less $10,000 MACRS deduction for 2010, less $8,000 MACRS deduction for 2011)]. The entire $82,000 tax basis qualifies for 100-percent bonus depreciation because the new truck was acquired during 2011.
Now you have a new, better truck and $82,000 in immediate tax deductions. You get a deduction for the $50,000 cash portion of the purchase price of the new truck, and for the basis in the old truck, you have $32,000.
This rule applies to bonus-eligible property acquired through a like-kind exchange (§1031) or an involuntary conversion (§1033).