Discussion:Vehicle purchase timing of deduction
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Discussion Forum Index --> Basic Tax Questions --> Vehicle purchase timing of deduction
Discussion Forum Index --> Tax Questions --> Vehicle purchase timing of deduction
| 31 October 2007 | |
| I have a client who is in the process of purchasing a truck for his business. It is a $50,000 truck eligible for the Sec 179 deduction up to $108,000.
We have always used the formal sales contract/purchase date as the date for deductibility. The salesman at the dealer mentioned something about the vehicle having to actually be off the assembly line and have a VIN# before it can be deducted. My assumption is that since it takes 8 weeks to build these, that the salesman wants a deal sooner rather than later. I am swamped here or I would spend the hour looking it up, but I know one of you brilliant minds out there already know the answer. what is the date that the vehicle purchased can be considered purchased for tax deduction purposes. Thanks, Fred | |
TheTinCook (talk|edits) said: | 31 October 2007 |
| Depreciation and Sec 179 start when the vehicle is placed in service. It's considered in service when it is ready and available for its specific use.
You would have to wait for the truck to be delivered before you can depreicate/expense it. IF you want a cite: Reg. 1.167(a)-10(b) and Sec. 179(a) | |
| 31 October 2007 | |
| TinCook is correct; the date placed in service is the critical factor. | |
| 31 October 2007 | |
| I should add there was a recent discussion about this subject by someone who wanted to 179 a truck purchased on New Year's Eve. The relevant issues were discussed in that thread. | |
| 31 October 2007 | |
| Never reliably ask a new car sales type about anything, including at times the vehicle or the deal itself. The vehicle has a VIN# even before it enters the assembly line. ;-) | |
Death&Taxes (talk|edits) said: | 31 October 2007 |
| And when the discussion starts into "I might be able to do something to help you with the date of delivery" run, don't walk, out of there as fast as you can. | |
| 21 March 2008 | |
| client wants to buy a truck for his S corporation which will be used exclusively by the business. The best and quickest place to get the $50,000 loan needed is from his home equity line of credit (HELOC of $100,000). He has used $30,000 of the HELOC already for a home remodel so there is $70,000 available.
Can we use the money in the HELOC to buy the truck? Do we have problems because the truck is not securing the loan. Can we allocate the interest payments and take the proportionate amounts on the schedule A and as interest expense on the 1120-S? Is there a required way to track the transaction in the corporation to properly document the deductions and what was done? I don't want him to borrow from the HELOC and loan it to the corporation. Then he would have to report interest income on his 1040 schedule B so the corporation could take the interest expense deduction and then take the loan expense as mortgage interest on schedule A. My suggestion: Why not just take out the $50k from his personal HELOC and then deposit the funds into the S-Corp as captial contribution. Then you purchase the truck in name of S-Corp. That way you can deduct 100% of HELOC interest on his S-A assuming his HELOC principal balance does not exceed $100k. And you can Sec179 portion of the truck and depreciate the balance assuming it is under the 6k GVW limit and used 100%. If over 6k GVW than sec179 entire 50k. | |
| 22 March 2008 | |
| Anyone agree or disagree with my suggestion shown below RE: T/P wanting to buy Truck for his S-CORP?
Thanks for any info! | |
| 22 March 2008 | |
| I would recommend the money be borrowed personally from the HELOC and loaned to the corp. Have the corp issue a note to s/h with definite repayment terms and adequate interest rate (mirror the HELOC rate). Then a) purchase the truck inside the corp and b) live up to the repayment terms of the note. | |
| 23 March 2008 | |
| I would agree with you also however as he indicates above:
I don't want him to borrow from the HELOC and loan it to the corporation. Then he would have to report interest income on his 1040 schedule B so the corporation could take the interest expense deduction and then take the loan expense as mortgage interest on schedule A. - Not sure why not....will follow up with him to see his or the client's reasoning. What I suggested is if not a loan: Why not just take out the $50k from his personal HELOC and then deposit the funds into the S-Corp as Additional Paid-In Captial. Then you purchase the truck in name of S-Corp. That way you can deduct 100% of HELOC interest on his Sch-A assuming his HELOC principal balance does not exceed $100k. And you can Sec179 portion of the truck and depreciate the balance assuming it is under the 6k GVW limit and used 100%. If over 6k GVW than sec179 entire 50k.
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