Less than 50% business use

[TaxBird]

In 2007, a clients business (SCorp) purchased a vehicle that was used 64% for business. In 2008 that percentage fell to 41%. When business use falls below 50%, I understand that means depreciation recapture between the amount claimed last year and the amount calculated using MACRS SL. The recaptured amount will be reported on Form 4797 secion IV.

My question comes in the bookkeeping. How do I track depreciation? Should the prior accumulated depreciation amount be adjusted to equal the effect of the recapture? Or does that just flow through in the current year books.

I'm getting myself all confused with this so any help (along with pointers on anything I may have missed) would be greatly appreciated.

[AuditorTurnedGood]

If 2008's books aren't closed yet I would adjust accumulated depreciation and offset it to other income in 2008, the year of the event triggering recapture. Isn't depreciation fun?

[TaxBird]

A follow up (Ugh!)

Ok. Cool. That's what I originally thought. Thank you.

So now for 2008, it looks better to do the standard deduction instead of actual mileage. Does depreciation still get taken (in addition to the .505/.585 @ 41%) or is there a depreciation component within the 2008 standard rates?

As you can probably tell...I AM SO CONFUSED! That worst/most frustrating part is, I am taking all this time for what is amounting to very little dollars (relatively speaking).

And, yes...fun Fun FUN!

[S T]

Standard Mileage Rate

See TTB tab 10 page 5

"Did you Know? - The standard mileage rate method cannot be used by corporations"

"To use the the standard mileage rate for a car that is owned by the taxpery, it must be used in the first year the car is available for business. Then in later years, the taxper can shoose between either the standard mileage rate method or actual expenses."

"The standard mileage rate includes an allowance for depreciation."

Hope this helps

Sandy

[TaxBird]

Oh Fooey!

Foiled again!

Well, at least that answers that question. Thank you sandy.

Of course, now I have a new question.

As far as I know, there's nothing to preclude me from taking 41% of the actual expenses correct?

[Davc]

If you liked that, you'll love this. Corporation do not have personal use of a vehicle. However, the employees personal use of the Corps vehicle needs to go on their W-2 as wages.