Announcement

Collapse
No announcement yet.

Rent to Own

Collapse
X
 
  • Filter
  • Time
  • Show
Clear All
new posts

    Rent to Own

    A client (S Corp) entered into a contract to purchase a diesel powered track vehicle. A downpayment of $3000 was made and quarterly payments of $1000 followed. The outright price of the equipment item is approximately $15000. The Tax Book specifies that rent-to-own equipment is depreciated over 3 years, but does not define the basis for depreciation. Would the basis be the outright price? Ron

    #2
    The 3-year depreciation period for RTO equipment is for property owned by a RTO dealer. (Code ยง168(e)(3)(A)(iii))

    If your S Corp client is actually buying the equipment, it should be recorded on the corp's books as a purchase and depreciated over the MACRS (or ADS) class life for that equipment. Its basis is the amount that would have been paid if purchased for cash, the the excess of actual payments over that amount is interest. Someone should prepare a loan amortization schedule so the principal and interest portions of each quarterly payment can be recorded correctly.
    Roland Slugg
    "I do what I can."

    Comment


      #3
      Great response. Thanks a bunch!

      Ron

      Comment

      Working...
      X