Gretel or others

[JG EA]

Gretel has posted many times on trailers, etc. used in 2106 expenses.

My questions is if a TP used his trailer in 2010, but not in previous 3 years before (he can't remember if he depreciated or not) on temporary assignments, and this year he put replacement parts into it, would those parts be depreciable or repairs.

I'm talking about big things, brakes, etc. He only used the trailer for temporary assignments in 2010, so 100% in 200. Cleint doesn't know what % in earlier years.

I'm having trouble thinking this through.

[erchess]

My Two Cents

If you don't see returns or transcripts from previous years proving there was not depreciation that it seems to you could have been claimed, assume it was claimed. If he is on the level and the amount is significant he won't mind you getting return copies or transcripts at his expense.

I would think a brake job on a trailer would be a repair as would any costs of fixing a part of the trailer that needed attention as a result either of a casualty or ordinary wear and tear. I would think that adding something the trailer did not previously have would be an improvement.

[JG EA]

Thank you for your reply. Things have changed. The reason I couldn't find anything is I was thinking this was years before me. But it was me! I tryed to depreciate it in 2007 but there ended up not being enough to itemize. Also I could just tell not enough to itemize in 2009. So do you have any thoughts on this?

Maybe if should add repairs and start depreciation all over again? Why do these things seem so confusing?

[erchess]

I believe

that you are deemed to have depreciated it if you could have depreciated it. Note that the standard mileage rate includes depreciation which must be factored in if a vehicle changes from mileage to actual. I would think that the standard deduction would include your depreciation.

[JG EA]

I hope not. If we didn't take any 2106 expenses in those years 2007 - 2009 how could we have to take 4th year now? This could make life very confusing if people could have depreciated something and didn't and sold it now and had to recapture. That doesn't seem to help my thinking processes here today.

[Gretel]

I think we have 3 issues here, 1. depreciation vs repairs, 2. which depreciation year taxpayer has to use, and 3. if trailer is sold is there any depreciation recapture for year when standard deduction was used.

1. I agree with Erchess that most likely the items you have are repairs, unless something new was added.

2. My inclination is to use year when trailer was put in service as first depreciation year. This year then would be the 3rd or 4th. Any depreciable improvements would start with year 1.

3. If trailer is sold I don't think there is any recapture of depreciation for years of standard deduction, since no tax benefit was received. In my eyes this is similar to unused depreciation for home office because of income limitations. If not used there is nothing to recapture.

[erchess]

Concur with Gretel's point three

Of course we are both following the logic of other situations, which is always dangerous in our field. I wish the code or some authority spoke specifically to this situation which cannot be uncommon.

[JG EA]

I think we have 3 issues here, 1. depreciation vs repairs, 2. which depreciation year taxpayer has to use, and 3. if trailer is sold is there any depreciation recapture for year when standard deduction was used.

1. I agree with Erchess that most likely the items you have are repairs, unless something new was added.

2. My inclination is to use year when trailer was put in service as first depreciation year. This year then would be the 3rd or 4th. Any depreciable improvements would start with year 1.

3. If trailer is sold I don't think there is any recapture of depreciation for years of standard deduction, since no tax benefit was received. In my eyes this is similar to unused depreciation for home office because of income limitations. If not used there is nothing to recapture.

I am glad you both agree, but I do not. At least about #2. And I only brought up #3 when I was complaining about #2. It didn't make sense to me at all. I thought well, shall we now put on our interview sheet "Have you ever tried to depreciate something, but didn't so we can start it off in the 3rd or 4th year?"

OK I'm being sarcastic. I always get sarcastic in the middle of tax season.Pub 946.

What Is the Placed in Service Date?
You begin to claim depreciation when your property is placed in service for either use in a trade or business or the production of income. The placed in service date for your property is the date the property is ready and available for a specific use. It is therefore not necessarily the date it is first used. If you converted property held for personal use to use in a trade or business or for the production of income, treat the property as being placed in service on the conversion date.

I consider that trailer personal property since we didn't itemize on his taxes.

[Gretel]

I am glad you both agree, but I do not. At least about #2. And I only brought up #3 when I was complaining about #2. It didn't make sense to me at all. I thought well, shall we now put on our interview sheet "Have you ever tried to depreciate something, but didn't so we can start it off in the 3rd or 4th year?"

JG, I know what you mean and was considering this. However, you cannot pretend you don't know that he tried to get depreciation. I don't think it matters if you actually use the depreciation for determining the year of depreciation.

I don't agree with your interpretation of the quote from the Pub. I think the date is always when property is available and ready for use. Only if converted from personal to business they don't want you to use the date when bought, hence the limitation in the wording.

[JG EA]

Well I thank you for your help and thoughts. I'm not sure what I will do? Pray that he doesn't get to itemize this year?

Thanks,