Claiming the Sec 179 deduction after termination of lease andpurchasing the vehicle


W

W Janusz

A client leases a truck over 6000 pounds for 3 years (FMV $40000) and
claimed actual expenses for the entire lease period at 100% business
use
When the lease terminated on 1/1/2011 he purchased the truck for
$25000 and continued to use it 100% for his business. Can he now claim
that he owns the truck and placed it in service on 1/1/2011 and take
the Sec 179 deduction. Since the 179 deduction limitation for trucks
over 6000 pounds is $25000, can he expense the entire cost of the
truck on his 2011 tax return. His business income before subtracting
the sec 179 deduction would be $35000.
 
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D

D. Stussy

W Janusz said:
A client leases a truck over 6000 pounds for 3 years (FMV $40000) and
claimed actual expenses for the entire lease period at 100% business
use
When the lease terminated on 1/1/2011 he purchased the truck for
$25000 and continued to use it 100% for his business. Can he now claim
that he owns the truck and placed it in service on 1/1/2011 and take
the Sec 179 deduction. Since the 179 deduction limitation for trucks
over 6000 pounds is $25000, can he expense the entire cost of the
truck on his 2011 tax return. His business income before subtracting
the sec 179 deduction would be $35000.
No. He has prior use of the asset and a deduction linked to that use.
That disqualifies it as "new" property. He still gets regular depreciation
based on $25k starting 2011. If he had bought a different truck, the
answer would be different.
 
B

Bill Brown

A client leases a truck over 6000 pounds for 3 years (FMV $40000) and
claimed actual expenses for the entire lease period at 100% business
use
When  the lease terminated on 1/1/2011 he purchased the truck for
$25000 and continued to use it 100% for his business. Can he now claim
that he owns the truck and placed it in service on 1/1/2011 and take
the Sec 179 deduction. Since the 179 deduction limitation for trucks
over 6000 pounds is $25000, can he expense the entire cost of the
truck on his 2011 tax return. His business income before subtracting
the sec 179 deduction would be $35000.
Section 179 applies only to new assets. When the client took title to
the truck, it wasn't new.
 
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A

Arthur Kamlet

Section 179 applies only to new assets. When the client took title to
the truck, it wasn't new.

I think you're thinking of Sec 168(k) assets, which for bonus
depreciation purposes, must be purchasd new.

If you purchase a used depreciable item, Sec 179 would usually apply.

The thing here is you're purchasing property already used and
deducted in your business.
 

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