Discussion:Revoking 06 sec 179 election and instead deducting miles
From TaxAlmanac
| Revision as of 04:51, 3 April 2008 Taxwizard (Talk | contribs) (Way too late to) ← Previous diff |
Revision as of 04:56, 3 April 2008 Taxwizard (Talk | contribs) Next diff → |
||
| Line 17: | Line 17: | ||
| }} | }} | ||
| - | {{ForumReplyPost|UserID=Taxwizard|Date=3 April 2008|Text=Way too late to switch to the optional mileage method. This needs to be done by the due date of the return for the year in which the vehicle was placed in service.}} | + | {{ForumReplyPost|UserID=Taxwizard|Date=3 April 2008|Text=Way too late to switch to the optional mileage method. This needs to be done by the due date of the return for the year in which the vehicle was placed in service. See Reg § 301.9100-7T(a)(2).}} |
Revision as of 04:56, 3 April 2008
Discussion Forum Index --> Advanced Tax Questions --> Revoking 06 sec 179 election and instead deducting miles
Discussion Forum Index --> Tax Questions --> Revoking 06 sec 179 election and instead deducting miles
| 2 April 2008 | |
| I signed up a new client, and we all know how much fun it is to see what the prior CPA did the year before. The following is my dilemma - I would appreciate any advice you have.
In early 2006 client started a construction business (LLC filing 1120S). The problem relates to the vehicle he used (large pickup) and potential recapture of depreciation. Client's father purchased the truck for $32,000 under the father's name, as client was 23 years old and just out of school (with a horrendous credit score). Client then paid his father monthly payments equal to the note. There was no formal lease or any other written document. Client wrecked and totaled the truck in January 2007. The insurance proceeds were paid to the father, which he used to pay off the note. Client did not purchase a new vehicle in 2007, and is instead using one on loan from his father-in-law. In preparing client's 2006 1120S & 1040, CPA was aware of the father's ownership and the inv conversion in Jan-07. In spite of this, CPA elected to take as a deduction against the LLC income the full cost of the truck (reduced for 25% business use) under section 179. Thus a total deduction of approx 24,000. As for the business use, the 75% business use actually encompassed nearly 60,000 business miles. QUESTION: Instead of recapturing the depreciation as income in 2007, any thoughts in regards to amending the 2006 return, deducting the 55K+ miles on the 1120S, and revoking the section 179 election? The result would be a wash in 2006, with no risk of recaptured income if audited. I feel like this is just too easy....please advise. I am also concerned that the IRS would try to reject mileage deduction given lack of formal lease agreement. Is it worth raising the flag via amending? | |
Donniecastleman (talk|edits) said: | 2 April 2008 |
| Replacement truck right? Can't you just write off the old truck as it is no longer "in service" due to your client with bad credit and young age (I won't even hurl insults at the client for having a bad credit score and wrecking a truck he couldn't qualify for, but all of this usually runs together) With a new truck in use, doesn't that reset the option of actual or mileage, then deducting the mileage for the new "borrowed" truck? Maybe I'm missing the jest of the question, bound to happen sooner or later. | |
| 3 April 2008 | |
| Way too late to switch to the optional mileage method. This needs to be done by the due date of the return for the year in which the vehicle was placed in service. See Reg § 301.9100-7T(a)(2). | |
