Depreciation of Heavy SUV

[tonia2021]

What happens if a taxpayer purchases a new Heavy SUV in 2009 - uses bonus depreciation and section 179 depreciation, uses this vehicle for 2 years and then trades it in for a different vehicle. This different vehicle isn't a heavy use SUV - it a car, but is still used more than 50% for business use.

Does the taxpayer need to recapture the Section 179 depreciation?

[Gretel]

Good question. I would do this: Choose to apply the old trade-in rules per IRS Notice 2000-4, meaning you keep depreciating the original asset (in your case that does not apply since already fully depreciated) and create a new asset for the boot and apply applicable vehicle depreciation rules.

[Davc]

Disagree. The auto and SUV are not like kind. You have a sale of the SUV and a purchase of the car.

[solomon]

They are like kind.

http://www.irs.gov/pub/irs-wd/0450005.pdf

From PLR

Even within the more restrictive parameters of the like-kind standard as applied to
personal property, the differences between an automobile and an SUV do not rise to the
level of a difference in nature or character but are merely a difference in grade or
quality. Thus, we conclude that the two are like kind property.

[Davc]

I'd be very careful with discloser relying on a PLR since they're very specific as to circumstances and not considered authority. Particularly since this one is for a leasing company so that the use for both types of vehicle is exactly the same from the owners standpoint. Also we don't know all of the representation and whether the SUVs in question are "heavy".

[solomon]

A PLR is among the types of authority. §1.6662-4(d)(3)(iii)

Types of authority.
... private letter rulings and technical advice memoranda issued after October 31, 1976;

[gmack]

Like kind

Disagree. The auto and SUV are not like kind. You have a sale of the SUV and a purchase of the car.

IRS has ruled that these are in fact "like property." See PLR-111387-04 wich states:

The like-kind property standard has been interpreted more narrowly in the case of
exchanges of personal property as compared to exchanges of real property. See
California Federal Life Insurance Co. v. Commissioner, 680 F.2d 85, 87 (9th Cir. 1982).
Even within the more restrictive parameters of the like-kind standard as applied to
personal property, the differences between an automobile and an SUV do not rise to the
level of a difference in nature or character but are merely a difference in grade or
quality. Thus, we conclude that the two are like kind property.