Bonus Depreciatation for short tax year

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  • Florida_EA
    Senior Member
    • Aug 2017
    • 153

    #1

    Bonus Depreciatation for short tax year

    Entity started in 2016 and then got dissolved in the same year in less than 6 months. It had an asset subject to bonus depreciation. Will the entity get 100% bonus depreciation for the short tax year?
  • kathyc2
    Senior Member
    • Feb 2015
    • 1947

    #2
    Originally posted by Florida_EA
    Entity started in 2016 and then got dissolved in the same year in less than 6 months. It had an asset subject to bonus depreciation. Will the entity get 100% bonus depreciation for the short tax year?
    There is no depreciation for assets held less than 1 year.

    Comment

    • Florida_EA
      Senior Member
      • Aug 2017
      • 153

      #3
      Originally posted by kathyc2
      There is no depreciation for assets held less than 1 year.
      The entity that held the assets was a partnership (P) and it got dissolved in less than 6 months. The partnership P had 2 members (one a partnership P1 and the other an individual I) and the partnership P1 bought the interest of the other member I. Hence the original partnership (P) became a disregarded entity. P1 inherited the assets and wants to continue depreciation with the new adjusted basis.

      In that case can P and P1 still depreciate the assets?

      Comment

      • kathyc2
        Senior Member
        • Feb 2015
        • 1947

        #4
        Originally posted by Florida_EA
        The entity that held the assets was a partnership (P) and it got dissolved in less than 6 months. The partnership P had 2 members (one a partnership P1 and the other an individual I) and the partnership P1 bought the interest of the other member I. Hence the original partnership (P) became a disregarded entity. P1 inherited the assets and wants to continue depreciation with the new adjusted basis.

        In that case can P and P1 still depreciate the assets?
        Just my opinion, but I would say the answer depends upon if the partnership was a LLC taxed as a partnership, or just a regular partnership. If LLC then the entity still holds the asset, but the way the entity is taxed will change. If the entity was just a partnership, then it doesn't live on and since it held the asset less than 1 year, no depreciation.

        Reading this again it sounds like even if it was a LLC, it was effectively dissolved? That it is not a partner in P1, but rather P1 took over the assets?
        Last edited by kathyc2; 09-07-2017, 11:46 AM.

        Comment

        • Florida_EA
          Senior Member
          • Aug 2017
          • 153

          #5
          The partnership that held the assets is an LLC taxed as a partnership by default. Let us call him P. The partners are P1 (another partnership) and an individual. P1 buys the individual's interest and hence P becomes a disregarded entity that P1 owns. P1 hence takes over the assets. So I think depreciation should apply for P and then P1?

          Comment

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