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Discussion:Does death mean disposal of property

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Discussion Forum Index --> Basic Tax Questions --> Does death mean disposal of property


Discussion Forum Index --> Tax Questions --> Does death mean disposal of property

MWPXYZ (talk|edits) said:

24 March 2014
Taxpayer bought, and was the 1st user of, a brand new F250, in May 2013. The taxpayer died in December 2013. I was thinking of using Section 168(k).

168(k)-1(f)(1)(i) does not allow the bonus depreciation if the asset is purchased and disposed of in the same taxable year.

Does death constitute a disposal? I cannot find any guidance except Chapter 3 of Publication 334, which does not list death as an event that creates a disposal of a depreciable asset. Unless one considers the taxpayer to have abandoned the asset.

Also, I assume that the beneficiary of his estate will use the FMV of the asset in December as the new basis.

Terry Oraha (talk|edits) said:

24 March 2014
I think a disposition is defined in 7701.

Terry Oraha (talk|edits) said:

24 March 2014
I could be wrong about 7701, I can't find it, but either way if anything the estate steps in the shoes, isn't this a gift.

Ckenefick (talk|edits) said:

24 March 2014
1250(d)(2), for example, says that there is no recapture at death, likely because there is no disposition. Not sure if you'll find that definition in 7701. As a general proposition, death does not create a disposition. If it did, you'd have to ask yourself, "What is the selling price?" And then ask, "Who pays tax on the gain?" It's well settled that tax appreciation, aside from IRD, evaporates at death.

Terry Oraha (talk|edits) said:

24 March 2014
Chris, good answer. Okay I'm going back to work!

MWPXYZ (talk|edits) said:

24 March 2014
I did check 7701, but I did not find a definition. But, I look for a lot of things and I do not find them. So, I had my wife look, and she did not find the definition in Section 7701, either.

I assumed that I could use 168(k); but I also thought I could be mistaken.

Ckenefick (talk|edits) said:

24 March 2014
The OP citation which says no bonus if acquired and disposed of in same year...comports with IRS's long-standing position for regular depreciation purposes. I myself don't think they have any basis for that rule, but someone can research it if they'd like.

Dennis (talk|edits) said:

24 March 2014
Decedent's tax year ends with death.

Terry Oraha (talk|edits) said:

24 March 2014
Good point Dennis.

Bonus is not reduced or prorated in a short tax year - Reg. 1.168(k)-1(d)(1)(I)

And here is one to Chris's point because I'm aware of the IRS policy on placed in service and disposed in the same year. I thought there was no authority for it, but there is however, this regarding bonus depreciation...

-Reg. 1.168(k)-1(f)(1).

In general. Except as provided in paragraphs (f)(1)(ii) and (iii) of this section, the additional first year depreciation deduction is not allowed for qualified property or 50-percent bonus depreciation property placed in service and disposed of during the same taxable year. Also if qualified property or 50-percent bonus depreciation property is placed in service and disposed of during the same taxable year and then reacquired and again placed in service in a subsequent taxable year, the additional first year depreciation deduction is not allowable for the property in the subsequent taxable year.

Terry Oraha (talk|edits) said:

24 March 2014
fortunately this is not a case of an asset being disposed and PIS in the same tax year.

Ckenefick (talk|edits) said:

24 March 2014
Oh, here's another (part of the) Reg...Reg ยง 1.168(d)-1(b)(3)(ii):

No depreciation deduction is allowed for property placed in service and disposed of during the same taxable year.

I'm not saying there's no regs, I'm just wondering about the IRS' authority for coming to that conclusion. What changed from Sec 167 (where such a rule didn't exist) to Sec 168?

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